Oil prices fell below the $50 mark this week and many experts are blaming the downward slide on the coronavirus outbreak that has spread from China. It’s become a demand issue rather than oversupply.
However, prices attempted a slight rebound on Tuesday as West Texas Intermediate crude for March deliver was up 32 cents at $50.43 a barrel on the New York Mercantile Exchange. The turn-around came a day after WTI officially entered the bear market because it was down nearly 21% from the Jan. 6 high of $63.27. A decline of at least 20% is the traditional definition of a bear market.
Western Texas Intermediate crude prices set in Cushing hit $49.99 a barrel on Monday, a drop of more than 3 percent.
Brent Crude dropped 4.19% and hit lows not reported in more than a year. It was trading at $54.26 a barrel. The reason is apparently the decline in oil demand as the coronavirus death toll has gone beyond the SARS outbreak reported 18 years ago.
Both WTI and Brent are down more than $10 from prices a month ago.
Demand for oil has dropped as travel to and from China is limited and the country cut its March orders from Saudi Arabia. The reduced demand has forced Sinopec to cut its refinery production by 600,000 bpd. Observers believe China’s oil demand will fall by 20% compared to the demand normally reported at this time of the year. The 20% drop could equate to 3 million barrels of oil a day.