February 4, 2020 / 5:41 AM / 19 days ago

Oil price volatility to remain elevated on virus worries: Goldman Sachs

FILE PHOTO: An oil pump is seen just after sunset outside Saint-Fiacre, near Paris, France September 17, 2019. REUTERS/Christian Hartmann/File Photo

(Reuters) - The global oil market expects the coronavirus outbreak to create a large demand shock and keep volatility in spot prices elevated, Goldman Sachs said.

The market is pricing in a 500,000 barrels per day average year-on-year loss in oil demand for 2020, all else constant (except for the positive impact of lower oil prices on demand), the Wall Street Bank said in a note dated Feb. 3.

Crude oil prices fell to their lowest in more than a year on Monday as the virus outbreak curtailed Chinese demand and sparked potential supply cuts by OPEC and its allies. [O/R]

“Oil prices are now at levels where we would expect a supply response from both OPEC and shale producers, and where China would likely seek to build crude inventories,” Goldman Sachs said.

The bank also said the market is expecting a negative impact of 0.44% on global GDP due to the virus.

The new coronavirus has killed over 420 people and infected thousands across more than a dozen nations, raising fears of a global economic fallout.

Reporting by Shreyansi Singh in Bengaluru; editing by Uttaresh.V

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