Oil prices skid on demand concerns as virus spreads globally

Oil prices tumbled nearly 3% towards a one-week low on Monday as the rapid spread of the coronavirus in several countries outside China left investors fretting about a hit to demand.

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

Brent crude fell by $1.69 or 2.9% to $56.81 a barrel by 0158 GMT US crude futures fell by $1.40 or 2.6% to $51.98.

"It's pretty clear in the middle of last week that the consensus overall was that it would be a temporary economic impact and that would be at least offset by the actions of central banks," said Michael McCarthy, chief market strategist at CMC Markets in Sydney.

"But as we've seen European and US markets react on Friday night and then further news over the weekend about the global spread of the virus, investors now are questioning the assumption about economic growth and that of course is weighing on oil markets."

South Korea's government put the country on high alert after the number of infections surged to over 700 with seven deaths, while in Italy, officials said a third person infected with the flu-like virus had died, as the number of cases jumped to above 150 from just three before Friday.

Iran said it had confirmed 43 cases and eight deaths, with most of the infections in the Shi'ite Muslim holy city of Qom. Saudi Arabia, Kuwait, Iraq, Turkey and Afghanistan imposed travel and immigration restrictions 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," said Stephen Innes, chief market strategist at AxiCorp in a note on Monday.

Oil prices received some support after local health commissions in China said on Monday that four Chinese provinces — Yunnan, Guangdong, Shanxi and Guizhou — have lowered their coronavirus 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 coronavirus outbreak.

In the United States, the oil rig count, an indicator of future production, 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.