Oil slides more than 2%, tumbling deeper into bear market territory

Oil production in Azerbaijan
Vostok | Getty Images

Oil prices fell more than 2% on Wednesday after hundreds of new coronavirus cases reported in Asia, Europe and the Middle East stoked fears that energy demand would decline, while crude oil inventories in the United States grew.

Brent crude fell $1.52 or 2.7% to settle at $53.43 per barrel, while U.S. West Texas Intermediate crude fell 2.34%, or $1.17, to settle at $48.73 per barrel. 

"It's still all about the virus here," said Bob Yawger, director of energy futures at Mizuho in New York. "It's hard to come up with any type of scenario where demand increases over the next couple months."

Prices briefly turned positive after the U.S. government reported a drop in gasoline inventories last week. Crude stocks grew by 452,000 barrels to 443.3 million barrels, the Energy Information Administration said, which was less than the 2-million-barrel rise analysts had expected.

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 the second half, it said.

Authorities around the world battled to prevent the spread of coronavirus, which has now been found in about 30 countries. Gains on Wall Street led stocks across the globe higher, a rebound from a sharp selloff linked to coronavirus worries, but other financial markets felt nagging pressure.

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).

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

The market was also watching for possible deeper output cuts by the Organization of the Petroleum Exporting Countries and its allies including Russia, a group known as OPEC+.

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.

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.