CRANBURY, N.J. (DTN) -- Oil futures on the New York Mercantile Exchange and Brent futures on the Intercontinental Exchange moved sharply lower to open this week's trading on fear the coronavirus outbreak known as COVID-19 would become a global pandemic that dampens world economic growth more than previously thought, cutting losses late session following comments from Federal Reserve official Loretta Mester that she expects the U.S. economy to continue to perform well while the United States intends to further tighten sanctions on Venezuela.
NYMEX April West Texas Intermediate futures settled down $1.95 at $51.43 barrel (bbl), paring a decline to $50.45 bbl, and ICE April Brent ended the session down $2.20 at $56.30 bbl after trading at a $55.13 low. April Brent holds a $0.53 premium to the May contract ahead of expiration Friday (2/28) afternoon.
NYMEX March RBOB futures settled down 4.15 cents at $1.6091 gallon, narrowing its discount with the April contract to 10.41 cents ahead of expiration Friday afternoon. NYMEX March ULSD futures settled 7.34 cents lower at $1.6132 gallon after sliding to a $1.5831 low.
Oil traders hit the sell button early in the trading session following a sharp increase in new cases of COVID-19 in Italy, Iran and South Korea.
"There's a lot of speculation about whether these increases mean that this epidemic has now become a pandemic," said Tedros A. Ghebreyesus, director-general of the World Health Organization, earlier Monday.
Ghebreyesus said the virus does have the potential to reach pandemic, but said "[f]or the moment, we are not witnessing the uncontained global spread of the virus."
A WHO-China joint mission believes actions by China have "averted a significant number of cases." Outside China, 28 countries have reported a combined 2,074 cases of COVID-19.
The WHO-China joint mission estimates the epidemic peaked and plateaued between Jan. 23 and Feb. 2, and has since steadily declined, said Ghebreyesus.
Earlier Monday, reports indicated the White House would ask Congress for as much as $1 billion to combat the coronavirus.
Over the weekend, reports emerged that China National Petroleum Corporation projects a 36% year-on-year drop in first quarter oil demand in China. The Organization of the Petroleum Exporting Countries estimates China's oil demand in the first quarter 2019 was 12.63 million barrels per day (bpd) with CNPC implying a 4.55 million bpd loss in the country's demand for oil during the first three months of 2020.
Crude futures moved off technical support partly on news the United States plans to intensify sanctions against Venezuela, targeting sales to Asian customers. On Feb. 18, the U.S. Treasury sanctioned Russia's Rosneft Trading for involvement in selling oil from Venezuela.
This afternoon, Mester, the president of the Federal Reserve of Cleveland, said a solid labor market and low inflation will continue to support the U.S. economy, and that monetary policy is "well-calibrated" to counter the coronavirus.
Still, equities plunged Monday, with Dow Jones Industrial down more than 1,000 points, falling below 28,000 to an 11-week low, on market fears COVID-19 would cut global economic growth. Weak U.S. economic data released Friday (2/21) fanned those worries, with the U.S. service sector contracting in February for the first time since 2013.
Brian L. Milne can be reached at email@example.com
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