The coronavirus epidemic has pushed the price of Brent crude on Monday to its lowest in 31 months and on the same week that investors await the critical OPEC meeting that will be held in Vienna, Austria on Thursday.
International benchmark Brent crude fell as low as $48.40 per barrel on Monday to mark its lowest level since July 24, 2017, according to official data.
While this was the lowest level in two years and seven months, it was also a 32.5% decline since Jan. 8, 2020 when Brent peaked at $71.75 per barrel due to the rising tension between the U.S. and Iran in the Middle East that threatened secure oil supply from the region.
Coronavirus, which emerged in China and quickly spread throughout the world, has caused weak economic activity in Asia and low oil demand around the world.
Brent crude closed last Friday at $50.52 per barrel, after starting the week at $57.85 a barrel last Monday, posting a 12.6% weekly decline -- the largest weekly plummet since January 2016.
American investment firm JPMorgan warned last month that if coronavirus develops into a SARS-style epidemic that hit China from 2002 to 2003, oil prices could fall by as much as $5 per barrel.
Global rating agency Fitch Ratings also said on Feb. 5 the coronavirus outbreak could curb oil demand growth if it continues to spread, leading to an extended production surplus as output grows in Brazil, Norway and the U.S.
- Critical OPEC meeting
To avoid an oil surplus in the global market, OPEC and its allies are expected to make further cuts to their production levels when they meet in Vienna on Thursday and Friday.
Most experts expect the group known as OPEC+ will make an additional output cut of at least 600,000 barrels per day (bpd) on top of their existing output curb of 1.7 million bpd that is already in place.
However, some experts concede it would not be a surprise if the group makes a deeper cut than expected.
OPEC+ could also extend its current production curb in place of 1.7 million bpd in place until the end of June to the end of this year.
Deeper and longer production cuts are anticipated to trim some of the supply glut in the global oil market against low demand to push crude prices higher.
By Ovunc Kutlu