Oil settles sharply lower as coronavirus spread sparks pandemic fears

Oil futures settled sharply lower Monday amid a broad market selloff sparked by contagion fears amid the further spread of the COVID-19 coronavirus beyond China.

ICE April Brent settled down $2.20 at $56.30/b, and NYMEX April WTI was $1.95 lower at $51.43/b at market close.

"Panic is hitting the oil markets as energy traders have no clue how far the coronavirus will spread," OANDA senior market analyst Edward Moya said. "It could be a bloodbath for oil in the short term as the risks of a global pandemic will cripple travel and trade."

Related coverage: ANALYSIS: Coronavirus impact making post-IMO 2020 risks for marine fuels

Related coverage: Soybean oil futures fall to lowest level since October amid spread fears

Related coverage: China's regulator lowers domestic natural gas prices amid coronavirus outbreak

As of Monday afternoon, the total number of confirmed coronavirus cases worldwide climbed to 79,407 and total deaths stood at 2,622, according to World Health Organization data. The rate of new cases, especially in mainland China, continues to slow, but markets were spooked Monday by an explosion in new cases over the weekend in South Korea and Italy that raised fears of the outbreak expanding into a truly global event.

The World Health Organization warned Monday that while the outbreak did not yet deserve to be called a pandemic, the virus has "pandemic potential."

"The sudden increase in new COVID-19 cases is certainly very concerning," WHO director general Tedros Ghebreyesus said. "We must focus on containment, while doing everything we can to prepare for a potential pandemic."

NYMEX March ULSD settled down 7.34 cents at $1.6132/gal, and March RBOB was 4.15 cents lower at $1.6091/gal.

Brent and WTI structure both weakened amid the selloff. The one-year Brent backwardation narrowed to 2 cents/b, in from $1.75/b on Friday. Year-ahead WTI futures settled at a 7 cent backwardation to front-month, in from $1.07/b on Friday.

Oil futures had pulled back from midday lows ahead of the settle amid a short-lived rally in equity markets. Brent and WTI had traded as low as $55.13/b and $50.45/b intraday, a slide of more than 5% from Friday. Still, crude futures settled more than 3.5% lower on the day, the biggest percentage slide since January 8.