Oil Futures Settle Lower Friday

WASHINGTON (DTN) -- Oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled lower on Friday. Futures extended their recent slide into the fourth consecutive week amid deepening concerns that a deadly outbreak of China's coronavirus would impair demand growth in the world's top oil consuming region.

At settlement, NYMEX March West Texas Intermediate futures dropped back $0.58 to $51.56 per barrel (bbl), while shedding 5% this week and down 16% so far this year. ICE Brent March futures expired lower $0.13 at $58.16 per bbl, with the new front-month April contract sharply expanding its discount to $1.54 bbl for a $56.62 bbl settlement. NYMEX February RBOB futures expired down 0.5 cent at $1.4887 gallon, while the March contract settled at a 1.54 cent premium at $1.5041 gallon. NYMEX February RBOB futures declined 1.7% this week and posted a 12.3% loss in January.

Now expired February ULSD contract fell 1.51 cents to $1.6245 gallon, and the March contract settled with a marginal premium at $1.6284 gallon. ULSD futures dropped 6.3% this week and shed nearly 20% in value during the past four weeks.

U.S. crude benchmark ended at a fresh six-month low on Friday amid growing chatter oil shipments into Chinese ports dropped sharply this month, fueling another wave of selling at the end of a volatile week. Fears of demand destruction in the world's top oil importer have led officials from the Organization of the Petroleum Exporting Countries to consider an emergency meeting early next month as the spreading virus shows no signs of easing. Still, Russia's energy minister Alexander Novak said on Friday the group needs several more days to monitor the situation to decide whether to call an early meeting that would consider additional or extended cuts.

The 23-nation coalition already announced deeper production cuts just over a month ago, and Saudi Arabia slashed its output to the lowest in nearly five years to halt the decline in oil prices late last year.

Now J&P Morgan economists expect demand shock in China will be equivalent to that seen during the SARS outbreak in 2003. The investment bank said in a note, "We suggest global oil demand growth could be trimmed by 300 kbd in 1Q20 and halved to 500 kbd in 2Q20 versus their current forecasts."

That follows a forecast from energy consultancy Wood MacKenzie on Friday estimating a 500,000-barrel-per-day (bpd) drop in global oil demand for the current quarter as a result of an economic slowdown in Asia.

China has remained an engine for global oil demand growth, accounting for nearly two-thirds of new oil consumption last year.

World Health Organization on Thursday declared a coronavirus outbreak an international health emergency, calling for a coordinated effort to combat a fast spreading disease. The agency, however, looked to calm markets, opposing unnecessary travel and trade restrictions. WHO Director-General Dr. Tedros Adhanom Ghebreyesus expressed confidence China's actions would "reverse the tide" and squelch the spread of the virus. Still, Beijing reported Friday its deadliest day of the Wuhan epidemic, with the total death toll climbing over 200 and almost 10,000 cases of infection confirmed worldwide. Amid the outbreak, a growing number of international airlines have cancelled or cut flights to China until as late as March.

Liubov George can be reached at luibov.georges@dtn.com

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