(Bloomberg) -- The outbreak of a deadly coronavirus that’s spread from China to the world is likely to impact oil markets globally, with aviation fuel suffering most, according to Goldman Sachs Group.

Taking a page from the SARS epidemic in 2003, the virus that originated in Wuhan is estimated to give a “negative shock” to oil, with jet fuel accounting for more than half of the 260,000 barrel-a-day demand loss. That translates to a “modest” $2.90 a barrel impact on oil prices, said analysts at the bank.

Ahead of the Lunar New Year holidays when air and rail travels across China typically peaks, the rising infection and casualty count is sending shockwaves across Asian financial markets. The spreading virus could further contribute to what has been a turbulent start to oil markets this year, when several supply outages sent the price of Brent to almost $72 a barrel for the first time since September.

Oil price volatility may rise in the coming weeks although Goldman still sees a sustained backwardation in Brent crude this year as the overall impact on fundamentals remain limited so far. Concerns over the virus’ impact on oil demand, however, is expected to counter jitters around supply disruptions across Libya, Iran and Iraq.

“While an OPEC supply response could limit the fundamental impact from such a demand shock, the initial uncertainty on the potential scope of the epidemic could lead to a larger price sell-off than fundamentals suggest,” wrote Damien Courvalin and Callum Bruce in a note.

The profit from turning crude into aviation fuel and the fuel’s premium to diesel were already falling on Tuesday and could still fall further, becoming the hardest hit from the virus outbreak. During SARS, Singapore jet fuel prices weakened relative to other regions. The International Air Transport Association estimated a decline of 8% in annual traffic for Asian airlines during the outbreak, while North American carriers experienced a smaller drop.

Health officials around the world are currently racing to gauge the danger posed by the new SARS-like virus with the first diagnosis being reported in the U.S. The number of total cases in China has been confirmed at 440 with nine dead.

To contact the reporter on this story: Sharon Cho in Singapore at ccho28@bloomberg.net

To contact the editor responsible for this story: Serene Cheong at scheong20@bloomberg.net

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