Crude prices dropped below $60 for the first time in nearly three months today, as the death toll from China's coronavirus rose and more businesses were forced to shut down, fuelling expectations of slowing oil demand.
Brent crude was down $1.40 a barrel at $59.29 this afternoon to mark its lowest since late October and the biggest intra-day fall since January 8.
US crude was down $1.05 at $53.14 a barrel. Both contracts had earlier fallen by more than 3%.
Global stock exchanges also fell as investors grew increasingly anxious about the widening crisis. Demand spiked for safe-haven assets, such as the Japanese yen and gold.
The death toll from the coronavirus rose to more than 80 and the Chinese government extended the Lunar New Year holiday to February 2, trying to keep as many people as possible at home to prevent the virus from spreading further.
Saudi Arabia and the United Arab Emirates, allies in the Organization of the Petroleum Exporting Countries (OPEC), tried to play down the impact of the virus today.
Riyadh, the de-facto OPEC leader, said the group could respond to any changes in demand.
An OPEC source said there were "preliminary discussions"among OPEC+ for an extension of the current oil supply cuts beyond March, and a possible deeper cut was also an option, if there was a need, and if the China virus spread impacted oil demand.
Saudi Arabia's Energy Minister Prince Abdulaziz bin Salman Al-Saud said today he felt confident the new virus would be contained.
Markets are being "primarily driven by psychological factors and extremely negative expectations adopted by some market participants despite (the virus') very limited impact on globaloil demand," the minister said.
"Such extreme pessimism occurred back in 2003 during the SARS outbreak, though it did not cause a significant reduction in oil demand," Prince Abdulaziz said in a statement.
The OPEC+ group has been withholding supply to support oil prices for nearly three years and on January 1 increased an agreed output reduction by 500,000 barrels per day (bpd) to 1.7 million bpd up to March.
OPEC+ "have the capability and flexibility needed to respond to any developments, by taking the necessary actions to support oil market stability, if the situation so requires," Prince Abdulaziz said.
Brent crude oil prices have dropped by almost a fifth since a spike in tensions between the US and Iran briefly lifted prices above $70 a barrel on January 8.
The losses since are in spite of a 75% drop in output from Libya to less than 300,000 bpd due to an ongoing blockade of oilfields.