Price of oil dips below $50 for first time in more than a year

The price for a barrel of oil dipped below $50 US a barrel for the first time since January 2019 on Monday. The coronavirus that has emerged from China is causing traders to fear for the impact on the economy.

A barrel of West Texas Intermediate briefly traded as low as $49.92 a barrel on Monday morning, the lowest level on record for the North American oil benchmark in more than a year. Less than a month ago, WTI was going for more than $63 a barrel, before gloom set in.

The main catalyst for the sell off was the coronavirus, which has reduced demand for jet fuel because of the cancellations of more than 3,000 flights a day in and out of China, but also because of fears that the contagion could spread into the broader economy.

"The market has clearly adopted a sell first, ask questions later approach to the coronavirus," RBC analyst Michael Chan said in a note to clients Monday.

China's economy typically consumes about 14 million barrels per day, about one sixth of world demand. Bloomberg reported Monday that a slew of flight cancellations amid health care officials attempt to stop the spread of the virus have reduced Chinese demand for oil by as much as three million barrels per day (bpd).

"Pricing at multi-year lows is a clear indication of rapidly slowing regional jet fuel demand," Chan said. "Expect further weakness if flight cancellations continue to proliferate in large size."

Reuters reported Monday that the Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, are considering a further 500,000 bpd cut to their oil production in the wake of reduced Chinese demand.

West Texas Intermediate isn't the only oil blend hit hard. The type of crude oil that comes from Canada's oilsands, known as Western Canada Select, is trading at just over $30 a barrel on Monday.