Oil prices slide over 3% on demand concerns as virus spreads

Global shares also extend losses with number of infections jumping in Iran, Italy and South Korea

LONDON: Oil prices tumbled by more than 3% on Monday, as the rapid spread of a coronavirus in several countries outside China left investors concerned about a hit to demand.

Global shares also extended losses as worries about the impact of the new virus grew, with the number of infections jumping in Iran, Italy and South Korea.

Brent crude was down $2.16, or 3.7%, to $56.34 barrel by 0935 GMT. US crude futures fell by $1.93, or 3.6%, to $51.45.

"Oil prices will remain vulnerable here as energy traders were not pricing in the coronavirus becoming a pandemic," said Edward Moya, senior market analyst at OANDA.

"While some parts of China are seeing improving statistics with the coronavirus, financial markets will remain on edge until we start seeing the situation improve in Iran, Italy, South Korea and Japan."

South Korea's fourth-largest city, Daegu, grew increasingly isolated as the number of infections there rose rapidly, with some airlines suspending flights to the city until March 9 and March 28, respectively. The country reported its seventh death after raising its infectious disease alert to its highest level.

Italy reported a third death from the flu-like virus and 150 infections.

Iran said it had confirmed 61 cases and 12 deaths, with most of the infections in the city of Qom. Afghanistan, Iraq, Kuwait, Saudi Arabia and Turkey imposed travel and immigration curbs on the Islamic Republic.

"We should not underestimate the economic disruption as a super spreader could trigger a massive drop in business activity around the globe of proportions the world has never dealt with before," Stephen Innes, chief market strategist at AxiCorp, said in a note on Monday.

Oil prices received some support after local health officials in China said on Monday that four provinces had lowered their virus emergency response measures.

Chinese President Xi Jinping said on Sunday the world's largest energy consumer will adjust policy to help cushion the blow to the economy from the virus outbreak.

Goldman Sachs said commodity prices could fall sharply before Chinese stimulus efforts later this year helps the sector achieve its 12-month return forecast of about 10%.

"The promise of stimulus has made commodity markets act like equity markets, building up risks of a sharp correction," the bank said in a note.

In the United States, the oil rig count rose for a third straight week. Drillers added one oil rig last week, bringing the total count to 679, the highest since the week of December 20, energy services firm Baker Hughes Co said.