Oil prices continued to drop as the US market opened today, to head for the fifth daily loss and dive to a 13-month low, due to lingering fears over the coronavirus outbreak and its impact on the global economy, in addition to a rise in US crude inventories according to preliminary data, while the official weekly report will be released later today.
US crude fell to the lowest price since Jan. 8, 2019 at $49.02 a barrel, after opening at $50.08, and hit a high of $50.41.
The US crude lost 2.4% yesterday, to post its fourth daily loss after the US warnings about the spread of the coronavirus.
This came after the rapid coronavirus spread beyond China, especially in South Korea, Italy and Iran, as the virus death toll in Iran rose to 16 victims, which is the highest after China.
The US Centers for Disease Control and Prevention urged citizens to prepare for a potential coronavirus outbreak in the US, especially after infections increased in more countries.
Fatih Birol, Executive Director of the IEA, said yesterday that the agency has cut it global oil demand outlook to ten-year low, adding that further cuts are possible due to the coronavirus outbreak.
The American Petroleum Institute (API) revealed yesterday in preliminary data the US crude inventories rose by 1.3 million barrels during the week ending in Feb. 21, lower than forecasts of 2 million barrels, and reached a total of 443.9 million barrels, which is the highest level since Dec. 13.
While the US Energy Information Administration (EIA) will release today the official data on inventories and production levels in its weekly report, with forecasts for inventories to rise by 2.3 million barrels, while in the last week's report the production levels held at the all-time record of 13.0 million barrels per day.
The US dollar fell on Wednesday, to deepen losses for the fourth straight day, and hit a 2-week low, as treasury yields slumped, and the market's bets rose for the US Fed to cut interest rates in its June meeting.
The dollar index fell against a basket of major currencies by more than 0.1% to 98.80 points, after it opened at 98.91 and hit an intraday high of 99.02.
The US dollar fell by 0.3% yesterday, its third straight daily loss, due to the release of lower-than-expected US consumer confidence reading for February and a drop in US bond yields.
The US 10-year treasury yields fell today, to a record low of 1.30% which weighs down on the US dollar.
Accordingly, the US interest rate futures are now fully priced for the prospects of the Fed to cut rates at the next June meeting by 25 basis points, which were at only 50% a week ago.
These developments about the expected US interest rate came despite Fed officials avoiding any hints about the monetary policy, as FOMC member Richard Clarida stated on Tuesday that the bank is monitoring the coronavirus situation, but it is still too early to judge if the current policy is appropriate or not.