UPDATE 6-Oil falls 2% as specter of China virus threatens fuel demand

* WTI touches lowest since November, Brent hits December low
* Lockdown in city of Wuhan sends shivers through markets
* JPM predicts oil 'price shock' if SARS-style epidemic
develops
* U.S. crude stockpiles drop slightly -EIA

(Updates prices, market activity, adds commentary; changes
byline, dateline, previous LONDON)
By Stephanie Kelly
NEW YORK, Jan 23 (Reuters) - Oil prices fell more than 2% on
Thursday on concern that the spread of a respiratory virus from
China could lower fuel demand if it stunts economic growth, but
losses were limited by a drawdown in U.S. crude inventories.
Brent crude LCOc1 futures lost $1.46, or 2.3%, to $61.75 a
barrel by 11:12 a.m. EST (1612 GMT), after having touched $61.25
a barrel, lowest since early December.
U.S. West Texas Intermediate (WTI) crude CLc1 futures fell
$1.45, or 2.6%, to $55.29 a barrel. The contract earlier fell to
$54.77 a barrel, the lowest since November.
Two Chinese cities that were at the epicentre of a new
coronavirus outbreak that has killed 17 people and infected
nearly 600 were put in lockdown on Thursday as health
authorities around the world scrambled to prevent a global
pandemic. The potential for a pandemic has stirred memories of the
Sudden Acute Respiratory Syndrome outbreak in 2002-03, which
also started in China and dented economic growth, causing a
slump in travel.
"Such health issues represent significant impediments to
normal travel and as a result, have forced the oil market to
discount some significant weakening in jet and diesel fuel
demand that is extremely difficult to measure until the spread
of the health virus is contained," said Jim Ritterbusch,
president of trading advisory firm Ritterbusch and Associates.
With coronavirus cases detected as far as away as the United
States, global stock markets also felt the effects of fears that
the virus could spread further as millions of Chinese prepare to
travel for the Lunar New Year this weekend. MKTS/GLOB
Beijing said on Thursday that it had canceled major public
events, including two well-known Lunar New Year temple fairs, to
curb the spread. "We estimate a price shock of up to $5 (a barrel) if the
crisis develops into a SARS-style epidemic," JPM Commodities
Research said in a note, citing historical oil price movements.
The U.S. bank maintained its forecast for Brent to average
$67 in the first quarter and $64.50 throughout 2020.
Tempering losses, U.S. crude inventories USOILC=ECI fell
405,000 barrels last week, although gasoline stockpiles rose to
their highest on record after 11 weeks of consecutive builds,
the Energy Information Administration reported. EIA/S
"The report was modestly supportive," said John Kilduff,
partner at Again Capital LLC in New York.
China, meanwhile, released data on Thursday showing its
gasoline exports rose by nearly a third last year thanks to new
refineries. This week, the International Energy Agency (IEA) said it
expects a surplus of 1 million barrels per day in the first half
of the year. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
CHART: U.S. oil may drop further to $54.67 after weak bounce
Brent oil may slide more to $60.91 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>