Oil prices accelerated their decline today as Brent crude fell by more than 2.5 per cent for the second day in a row.
The steep drop means that Brent crude is now trading at $61.49 per barrel, its lowest price in almost two months. West Texas Intermediate has been hit even harder, falling back three per cent to $55.06 a barrel.
The slump is due to a number of factors, including concerns over the spread of China’s coronavirus, which has already knocked major global markets.
Analysts at JPM Commodities fear that if the disease turns into a SARS-style epidemic prices might take a hit of up to $5 per barrel.
According to Standard & Poor, the outbreak could cut demand by 260,000 barrels per day, much of which will come from jet fuel as risk of infection stops people from travelling.
However, the market remains materially oversupplied, showing that outages such as in Libya at the beginning of the week are no longer the problem they once were, said Oanda’s Craig Erlam, adding that $60 per barrel was now “looking an interesting test”.
Speaking at Davos, Saudi Arabia’s minister of energy Prince Abdulaziz bin Salman said that further cuts were on the table when oil production cartel Opec meets again in March.
The group is already officially curbing supply by 1.7m barrels a day, with Saudi Arabia taking a further 400,000 barrels of the table voluntarily in order to prop up prices.
The announcement comes as Brazil once again began to bang the drum for being admitted to the producer group, with talks set to begin in July.
Output in the South American country has already risen to an all time high amid signs that increasing non-Opec production will render Opec “impotent”, said Neil Wilson from markets.com.
“Effectively all OPEC is doing is ceding market share”, he added.
At the start of the month Brent crude was trading at four month highs after the US assassinated Iranian military leader Qassem Soleimani in Baghdad, but have subsequently dropped as tensions dissipated.