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Oil prices fell to the lowest in more than a year on Monday, dragged down by concern over demand in China after the coronavirus outbreak, though the possibility of deeper crude output cuts by OPEC and its allies offered some price support.
"The coronavirus is the number one issue in the global market right now," said Phil Flynn, analyst at Price Futures Group in Chicago. "We have not seen a demand destruction event of this scale that moves this quickly."
Brent crude was down $1.82 at $54.80 a barrel by 11:33 a.m. EST (1633 GMT), its lowest since January last year. The first-month Brent contract traded at 10 cents less than the second-month contract, a reversal from the front-month premiums seen as recently as last week. The discount was the largest since July.
U.S. West Texas Intermediate (WTI) crude fell $1.16 to $50.40, also the lowest since January 2019.
As the coronavirus outbreak hits fuel demand in China, the world's biggest crude oil importer, refiner Sinopec Corp told its facilities to cut throughput this month by about 600,000 barrels per day (bpd), or 12%, the steepest cut in more than a decade.
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Independent refineries in Shandong province, which collectively import about a fifth of China's crude, cut output by 30-50% in a little more than a week, executives and analysts said.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, are considering a further 500,000 bpd cut to their oil output, three OPEC sources and an industry source told Reuters.
The Wall Street Journal reported that another option being considered would involve a temporary cut of 1 million bpd by Saudi Arabia to jolt oil markets.
"The market needs assurances that the supply/demand equation remains in balance for prices to hit a floor. This suggests a commitment from OPEC not just to extend oil supply cuts, but even implement deeper ones beyond March," said FXTM analyst Hussein Sayed.
Iranian Oil Minister Bijan Zanganeh said the oil market is under pressure with prices dropping below $60 a barrel, and "efforts must be made to balance it."
Ratings agency Fitch on Monday said the coronavirus outbreak could push the global oil market into surplus and that OPEC+ may need to cut production further if the outbreak lasts for several months.
On the first day of trade in China since the Lunar New Year holiday, investors erased $393 billion from the nation's benchmark equities index, sold the yuan currency and dumped commodities as coronavirus fears dominated markets.
