Brent crude nears $50/bl as virus hits Asian economies

Crude futures fell sharply in Asian trading as the widening coronavirus outbreak threatens economic growth.

Front-month April Ice Brent crude futures fell as low as $50.59/bl today, down by 3pc from yesterday's close. Brent futures have fallen by 13.5pc from the close of $58.50/bl on 21 February.

The Nymex front-month April WTI futures contract fell as low as $45.45/bl, down by 3.5pc from yesterday's close and lower by 14.9pc in the last week.

There are growing signs that the outbreak will hit economies in Asia-Pacific, which is the main regional driver of oil demand growth. The central bank in South Korea, the worst-hit country outside China, warned its economy may contract during January-March as the outbreak slows exports and domestic consumption.

The impact of the virus will be concentrated in the first quarter, the Bank of Korea said. It cut its full-year economic growth forecast to 2.1pc from 2.3pc.

Budget air carriers in the country have asked the government to extend them low-interest loans and waive airport fees and fuel import duties. The coronavirus outbreak has weighed on jet fuel demand in particular, sending Asian jet fuel refining margins to the lowest level for at least 13½ years.

An index of South Korean business sentiment dropped to an 11-year low this month, the Korean economic research institute said this week.

The number of confirmed coronavirus cases in South Korea rose to 2,022 this morning, up by 427 in the past 24 hours. This is the first time there have been more new cases in South Korea than in China, which reported 327 new cases yesterday.

South Korea's government today pledged at least 20 trillion won ($16.5bn) in emergency economic measures, including tax reductions, low-interest loans to small businesses and increased public-sector investments. The finance ministry will also seek approval for a supplemental budget, aimed at helping businesses recover and improving quarantine efforts, which will be larger than the W11 trillion package funded during the Middle East Respiratory Syndrome outbreak in 2015.

Elsewhere in Asia-Pacific, Malaysia yesterday cut its forecast for 2020 GDP growth to 3.2-4.2pc, down from 4.8pc previously. The government announced a 20bn ringgit ($4.7bn) stimulus package to offset the impact of the coronavirus.

Singapore last week warned its economy could fall into recession in 2020 for the first time in 19 years. The IMF said the coronavirus outbreak may cut China's economic growth by 0.4 percentage points to 5.6pc this year.

By Kevin Foster and Tony Cox

source: Argus Media