Brent crude prices fell on Monday to their lowest in more than a year, dragged down by worries about lower demand in China, the world's largest oil importer, following a coronavirus outbreak there.
There are signs fuel demand has plunged in China as airlines have cancelled flights to halt the spread of the coronavirus and as provinces delay the reopening of factories after the Lunar New Year holiday. Supply chains across the world's second-largest economy and crude consumer have been disrupted, prompting its biggest refiner Sinopec to cut output by about 12% this month.
Brent crude was at $56.44 a barrel by 0750 GMT, down 18 cents, or 0.3%, Prices dropped by as much as 2.1% to $55.42, the lowest since January 4, 2019.
US West Texas Intermediate (WTI) crude rose 10 cents to $51.66 a barrel, after earlier hitting a session low of $50.42, down 2.2% to the lowest since January 14, 2019.
China's factory activity stalled in January as export orders fell, and analysts expect a big plunge in February's data as the virus outbreak hits demand in the country.
China's central bank planned to inject more liquidity to shore up its economy on Monday, and pledged over the weekend to use various monetary policy tools to help allay the impact of the virus outbreak.
"Travel restrictions and the extended shutdown of large parts of the Chinese industrial sector have weighed on oil demand and this is reflected in the weakness that we are seeing in the ICE Brent time spreads," ING commodity analysts said in a note.
The premium of the first-month Brent contract to the second-month contract narrowed to 9 cents a barrel on Monday from 70 cents a month ago, indicating that traders are not concerned about supply tightness because of the demand impact of the coronavirus.
The Organization of the Petroleum Exporting Countries (OPEC)and its allies could bring forward to February a planned meeting in March to discuss the impact on oil demand from the virus flare-up. Already, OPEC and non-OPEC's Joint Technical Committee (JTC) are scheduled to meet in early February to assess the virus impact, OPEC+ sources said.
OPEC's oil output plunged in January to the lowest since 2009 after several members led by Saudi Arabia over-delivered on a new agreement to cut production and as Libya's supply slumped.
"They've done a good job of managing the price, but it is unexpected that demand would be impacted by something like a pandemic," Tony Nunan, a senior risk manager at Mitsubishi Corp in Tokyo.
"The expectation is that in the next meeting that they will deepen the (production) cuts" to support prices, he said.