Oil dropped to its lowest level since October on Monday, as fears over a potential slowdown in crude demand, sparked by the coronavirus outbreak, continued to pressure prices.
U.S. West Texas Intermediate crude fell 1.9%, or $1.05, to settle at $53.14 per barrel, for the fifth straight session of losses, and the lowest closing price since Oct. 15. At its low, WTI dipped more than 3% to hit $52.13, a price not seen since Oct. 10. The contract is coming off its third straight week of losses and worst week since July, and is now trading in bear market territory after falling more than 20% from its recent April high of $66.60.
International benchmark Brent crude fell 2.5%, or $1.53, to $59.16. It's also coming off its third straight week of losses, and its worst week since Dec. 2018.
The flu-like coronavirus, first identified on Dec. 31 in the Chinese city of Wuhan, has now killed 82 people, according to Chinese officials, with at least 2,900 confirmed cases worldwide. The virus has spread to 10 additional countries, including South Korea, Japan and the United States, where the fifth case was confirmed on Sunday.
A slowdown in China's economy would hit oil demand since the nation is the world's largest crude oil importer —importing a record 10.12 million barrels per day in 2019 — and the world's second-largest oil consumer, according to data from the General Administration of Customs.
"Supply risk has been tested in acute fashion over recent months, but the coronavirus presents the first major severe test to demand in years," RBC analyst Michael Tran said in a note to clients Monday. "Concerns surrounding the virus and the negative impact on demand have taken the oil market hostage and have sent oil prices on a five-day losing streak."
On Sunday Saudi Arabia's energy minister Prince Abdulaziz bin Salman said that OPEC+ would step in to bolster prices if needed, while noting that the sell-off was "primarily driven by psychological factors and extremely negative market expectations adopted by some market participants despite (the virus') very limited impact on global oil demand," according to a report from Reuters.
But his comments did little to assuage fears as prices continued to move lower Monday.
"The recent price plunge, due to demand concerns emanating from the coronavirus outbreak, has Saudi Arabia and Russia in full scramble mode," Again Capital's John Kilduff said to CNBC. "With winter in the Northern Hemisphere winding down, producers were already staring down a slack demand period, ahead of the summer driving season. It has to be concerning to them that their attempts at jaw-boning the market, over the weekend, have fallen flat," he added.
"It [OPEC] might need to take action if oil prices fall below a certain threshold," S&P Global Platts' Claudio Galimberti said Monday on CNBC's "The Exchange." "And probably they are already at about that threshold."
When attempting to quantify the potential impact on oil demand, some Street analysts have used the 2002 outbreak of SARS as a reference case. On Thursday JPMorgan said that if the virus becomes a "SARS style epidemic," it could shave $5 per barrel from oil prices.
One key difference for the oil market this time around, however, is that since the early 2000s air travel has increased in China, and jet fuel demand has been a key driver of global growth.
But RBC said that while jet fuel demand has already softened, it's not yet a "global demand story," and that estimating "the impact on what a SARS-like event would have on oil price" is an "exercise in futility."
That said, the virus is sending traders scrambling and several bullish events last week, including a halt in Libya's production as well as a surprise decline in U.S. inventory, weren't enough to prop up prices.
"The corona virus has quickly morphed from being a curiosity to a potentially more ominous threat to the global economic and oil demand outlook for 2020," Simmons Energy analyst Bill Herbert said Sunday.
- CNBC's Michael Bloom and Sam Meredith contributed to this report.