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US crude drops below $50 as virus spreads in Middle East and Europe

Brent crude was down 55 cents, or 1%, to $54.40 a barrel by 1432 GMT, while U.S. West Texas Intermediate (WTI) crude was 24 cents, or 0.5%, lower at $49.66 a barrel.

Reuters|
Last Updated: Feb 26, 2020, 09.31 PM IST
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Fears of a pandemic have escalated as authorities around the world battle to prevent the spread of coronavirus, which has now been found in about 30 countries.

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US crude dropped below $50 on Wednesday to its lowest since January 2019, as Asia, Europe and oil-producing countries in the Middle East reported hundreds of new coronavirus cases and the United States warned of an inevitable pandemic.

Brent crude was down 55 cents, or 1%, to $54.40 a barrel by 1432 GMT, while U.S. West Texas Intermediate (WTI) crude was 24 cents, or 0.5%, lower at $49.66 a barrel.

Pandemic fears intensified as authorities around the world battled to prevent the spread of coronavirus, which has now been found in about 30 countries.

World stocks tumbled for a fifth straight day, while safe-haven gold rose back towards seven-year highs and U.S. bond yields held near record lows after governments and health authorities warned of a possible pandemic.

The World Health Organization's (WHO) chief said while the sudden rise in novel coronavirus cases was "deeply concerning", the virus could still be contained and did not amount to a pandemic.

President Donald Trump said he will hold a news conference on the coronavirus at 6 p.m. (2300 GMT).

Goldman Sachs cut its 2020 oil demand growth forecast to 600,000 barrels per day (bpd) from 1.2 million bpd, and lowered its Brent forecast to $60 a barrel from $63.

"We see oil prices improving through the year, assuming demand begins to normalise in 2H20," it said, referring to the second half of the year.

Due to the coronavirus outbreak, Germany's economy is nearing stagnation, the DIW economic institute said on Wednesday.

Oil prices had risen earlier in the day on short-covering and amid hopes for deeper output cuts by the Organization of the Petroleum Exporting Countries and its allies including Russia, a group known as OPEC+.

Saudi Arabia's energy minister said on Tuesday he was confident that OPEC+ would respond responsibly to the spread of the virus.

OPEC+ are due to meet in Vienna over March 5-6.

"Yet there is no guarantee that buyers will emerge out of the woodwork even if OPEC+ further tightens the oil spigots," said Stephen Brennock of oil broker PVM.

Analysts said prices were also under pressure from the recent strength in the U.S. dollar, which generally moves in the opposite direction to oil prices.

The International Energy Agency's (IEA) outlook on global oil demand growth has fallen to its lowest level in a decade, IEA Executive Director Fatih Birol said on Tuesday, adding it could be reduced further due to the coronavirus outbreak.

U.S. crude inventories are expected to rise for a fifth week running. The American Petroleum Institute (API) said late on Tuesday that crude stockpiles rose 1.3 million barrels last week.

Government data due at 10:30 a.m. EST (1530 GMT) on Wednesday was expected to show a 2 million-barrel rise, according to a Reuters poll.
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