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Oil prices drop as virus affects China’s demand

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Oil prices increased their losses on Monday and dropped after the coronavirus outbreak due to low demand concerns in China, the world’s largest oil importer.

Brent and US West Texas Central (WTI) crude oil dropped for the fourth consecutive week after airlines canceled flights to China. Supply chains in the world’s second largest economy were also interrupted, causing Sinopec, the largest refinery to cut production.

Brent crude stood at $ 56.14 a barrel at 0241 GMT, down 48 cents or 0.9%, after losing nearly 12% in January, the hardest monthly drop since November 2018.

The U.S. West Texas Intermediate (WTI) raw product fell 24 cents to $ 51.32 after reaching a low session of $ 50.42 previously. The biggest drop from January was 15.6% in WTI price.

Measures to support China’s economy can help oil prices recover in the short term.

There is no doubt that closing down airports will cause demand delays if they are not delayed or eliminated.

China’s factory activity stopped in January when export orders dropped, and analysts are expecting a huge drop in February data as the virus outbreak has affected demand in the country.

The Chinese central bank plans more liquidity to support its economy on Monday, and promised to use a variety of monetary policies and tools to alleviate the impact of the virus outbreak during the weekend.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies may pull a March meeting to February to discuss the reflection of the impact of the exacerbation of the virus concern on oil demand. The OPEC and Non-OPEC Joint Technical Committee (JTC) is scheduled to meet in early February to assess the impact of the virus.

OPEC’s oil production has fallen to its lowest level since January, after some Saudi Arabian-led members cut production and signed a new agreement on Libya’s supply.

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