Oil prices drop as IEA predicts market surplus

Oil prices dropped on Wednesday in Asia as the International Energy Agency forecasted that there will be market surplus.

US Crude Oil WTI Futures fell 0.5% to $58.10 by 12:05 AM ET (04:05 GMT), while international Brent Oil Futures dropped 0.4% to $64.33.

Goldman Sachs said in a note that oil markets are likely to be impacted by China’s deadly coronavirus, especially if it plays out like the SARS epidemic in 2003.

The virus that originated in Wuhan could result in global demand falling by 260,000 barrels a day in 2020, the investment bank said. That would probably lead to a $2.90 a barrel drop in oil prices.

“While an <a href=’https://staging.theenergyyear.com/companies-institutions/opec/’>OPEC supply response could limit the fundamental impact from such a demand shock, the initial uncertainty on the potential scope of the epidemic could lead to a larger price sell-off than fundamentals suggest,” Goldman analysts Damien Courvalin and Callum Bruce said in the note.

Meanwhile, the IEA forecast a market surplus in the first half of the year, further weighing on crude prices.

“I see an abundance of energy supply in terms of oil and gas,” head of the IEA, Fatih Birol told the Reuters Global Markets Forum, while he was attending World Economic Forum meeting in Davos, Switzerland.

“It’s the reason that recent incidents we have seen – with the Iranian general killed, Libya unrest – didn’t boost international oil prices,” Birol said, referring to the US killing of an Iranian commander and retaliation by Tehran that sent prices briefly soaring earlier this month.