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Oil prices extended their losses on Monday, dragged down by worries about lower demand in China, the world's largest oil importer, following a coronavirus outbreak there.
Brent and US West Texas Intermediate (WTI) crude fell for a fourth week in a row last week after airlines cancelled flights to China. Supply chains across the world's second-largest economy have also been disrupted, prompting its biggest refiner Sinopec to cut output.
Brent crude was at $56.14 a barrel by 0241 GMT, down 48 cents, or 0.9 per cent, after losing nearly 12 per cent in January, the steepest monthly decline since November 2018.
US West Texas Intermediate (WTI) crude fell 24 cents to $51.32 a barrel, after earlier hitting a session low of $50.42. The front-month WTI price fell 15.6 per cent in January, the biggest monthly drop since May.
China's measures to support its economy might help put a floor under oil prices in the short term, even though the outlook for oil demand remains bearish, said Michael McCarthy, chief market strategist at CMC Markets in Sydney.
“The shuttering of airports suggests that there would be at least some demand delay, if not deferred or destroyed,” he said.
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.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies could bring forward a March meeting to February to discuss the impact on oil demand from the virus flare-up. Already, OPEC and non-OPEC's Joint Technical Committee (JTC) have scheduled to meet in early February to assess the impact of the virus, OPEC+ sources told Reuters.
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 they will deepen the (production) cuts” to support prices, he said.
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