OPEC has announced production levels hit a three-year high in July

Oil prices plunge more than 3% as coronavirus threat looms

LONDON, February 28, 2020 – Oil prices plunged more than 3% and traded near their 2017 lows as reports around the coronavirus health crisis worsened.

US Crude Oil WTI Futures plunged 3.1% to $45.62 by 1:35 AM ET (05:35 GMT). International Brent Oil Futures slid 2.8% to $50.28.

Investor sentiment continued to worsen as countries around the world reported more confirmed cases of the new virus. The World Health Organization warned on Thursday that the coronavirus outbreak has the potential to become a pandemic and is at a decisive stage.

“The spread of the virus is spreading not only fear but oil demand destruction and horror thinking about potential demand destruction to come,” said Phil Flynn, energy analyst at the Price Futures Group brokerage in Chicago.

Flynn cited data from the US Energy Information Administration showing demand for jet fuel down 8% year on year as flights were being canceled across the world.

Following today’s losses, oil prices are set to record their biggest weekly decline in more than four years. Brent has shed around 13% this week, while US WTI was also down 14% for the week.

US stocks and other risk assets tumbled this week amid a spike in new cases in countries outside of China. The illness has killed over 2,800 and infected more than 82,000 to date.

Adding to uncertainty, it is unclear whether OPEC and its allies will put a floor under the price fall by cutting production when they meet next week.

“At least a 1 million bpd cut for the second quarter strikes us as necessary to merely moderate inventory builds, and we confess to underestimating demand destruction over the last several weeks,” Jefferies analyst Jason Gammel said in a Reuters report.

The producer group is currently reducing output by roughly 1.2 million barrels per day to support prices.

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