Oil prices fell more than 6 percent on Thursday after US President Donald Trump unexpectedly announced restrictions on travel from Europe in an attempt to halt the spread of coronavirus after the World Health Organization described the outbreak as a pandemic.
The slump in oil is being compounded by the threat of a flood of cheap supply after Saudi Arabia and the United Arab Emirates said they would raise output in a stand-off with Russia.
Brent crude was down $2.33, or 6.5 percent, at $33.46 a barrel by 1359 GMT. US crude was down $1.79, or 5.4 percent, at $31.19.
Global equities were also hit after President Trump said the United States would suspend all travel from Europe, except Britain and Ireland, as he unveiled measures to contain the coronavirus.
The oil market was taking the decision very negatively because of the expected impact on jet fuel demand, business activity and economic growth, said Bjoernar Tonhaugen, head of oil markets at energy consultant Rystad.
"It leads to further loss of confidence in governments‘ handling of the fallout and increases uncertainty about the extent of the virus impact on the overall economy, reflected in sharp falls in risk assets across the board this morning."
The two benchmarks are down about 50 percent from highs reached in January. They suffered their biggest one-day declines since the 1991 Gulf War on Monday after Saudi Arabia launched a price war.
The six-month Brent contango spread from May to November widened to as low as $6.40 a barrel, a level not seen since February 2015.
Contango is where the futures price of a commodity is higher than the spot price, prompting traders to fill tankers with oil to store for later delivery.
The cost to transport oil on supertankers soared as major producers scrambled to secure vessels to ship more crude in an effort to regain market share and buyers took advantage of plunging oil prices.
As many await to see who will break first in the Saudi-Russia price war, Ehsan Khoman, head of MENA research and strategy at MUFG, said: "We believe that both sides have enough financial capacity and sufficiently divergent goals to sustain the oil price war for many quarters, not months."
The US Energy Information Administration (EIA) and the Organization of the Petroleum Exporting Countries (OPEC) have cut forecasts for oil demand because of the coronavirus outbreak and now expect demand to contract this quarter.
"We estimate a production surplus could reach between 5 million and 6 million barrels per day in April," said Kirill Tachennikov, director and senior oil analyst at BCS Global Markets in Moscow.
"However, despite the volatility, we expect to see global oil demand normalise as we move towards the second half of 2020 – likely without the need of OPEC intervention."
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