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Brent, WTI settle at fresh 14-month low

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ULSD futures climb on tight regional inventories

New York — Crude oil futures settled at fresh 14-month lows Friday as the continued global spread of coronavirus fed fears of flattening demand and raised the specter of economic downturn.

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ICE April Brent settled $1.66 lower at $50.52/b. NYMEX April WTI was $2.33 lower at $44.76/b at market close.

Globally, 84,161 cases of coronavirus have been confirmed in 59 countries as of Friday, according to University of Virginia data.

While the overall number of new cases continues to fall, the growth rate outside of China has accelerated this week, with major outbreak emerging in South Korea, Italy, and Iran.

Major stock indexes fell into correction territory this week, with the S&P 500 closing Friday 11% below week-ago levels.

"Covid-19 is arguably the biggest risk to global growth since the Great Recession," Platts Analytics warned in a recent update. "The rolling geographic nature of the virus' spread means its duration could be extended into the second quarter."

After five straight declining sessions, front-month Brent and WTI were down about 14% and 16%, respectively.

Authorities in northern Italy have ordered the closure of schools, bars, and other public spaces until March 1, and has imposed strict quarantine restrictions in two northern "hotspot" regions close to Milan and Venice, with about 50,000 people prevented from entering or leaving 11 towns between Veneto and Lombardy for the next two weeks.

EasyJet — one of Europe's largest regional airlines — said Friday it was cancelling some scheduled flights and warned travel demand had slowed in a hit to the jet fuel market. IAG, Lufhansa and Air France also warned about the impact.

S&P Global Platts Analytics has adjusted its 2020 global oil demand growth outlook down to 860,000 b/d, marking the weakest forecast since 2011.

Weakened demand outlooks pushed crude forward curves back into contango this week. Year-ahead Brent futures settled Friday at a 19 cents/b contango to the front month Friday, flipped from $1.75/b backwardation last Friday, while the one-year NYMEX WTI spread ended the session in a $1.41/b contango, compared with an 81 cent/b backwardation last Friday.

"Much of the world expected this virus to mostly impact China, but the global spread is going to wreak havoc with global travel and trade," OANDA senior market analyst Edward Moya said in a note. "Next week, OPEC+ will have to deliver a deeper production cut as oil prices remain in free fall. How much support that will provide prices will likely be limited as the oil trade remains focused on the global spread of the virus."

The OPEC+ group will meet in Vienna March 5-6 to discuss market conditions and the future their current 1.7 million b/d supply cut agreement set to expire at the end of March.

Refined product futures were mixed, with heating oil futures finding support from tight regional inventories. NYMEX March ULSD settled up 14 points at $1.4906/gal while March RBOB finished down 1.51 cents at $1.3955/gal.

US Atlantic Coast ULSD stocks dropped 2.47 million barrels to a nine-week low 34.74 million barrels last week, according to the latest Energy Information Administration data.