Chinese coronavirus hit the global oil market
The Chinese coronavirus brought down world prices for oil. During the trading on Monday, the price for the North Sea Brent crude oil fell below $58 per barrel, which was the first time since October 10, 2019. The decrease was 4.5%, although a couple of weeks ago quotes exceeded $70. The price for the West Texas WTI fell by 3.34% down to $52.38 per barrel.
According to experts, investors fear that the negative factor associated with coronavirus will slow down the economic growth in China, which will result in a decrease in the global economy growth rate.
The drop of prices makes major oil-producing countries nervous. Saudi Arabia tried to reassure OPEC participants on the weekend. Kingdom’s Energy Minister Abdulaziz bin Salman said the country is closely monitoring the development of the situation, but so far sees the limited effect of the virus on global demand for energy.
Furthermore, Brazil had an additional adverse effect on the hydrocarbon market. The country refused not only to join OPEC, but also to participate in an agreement to limit the production, as was declared on Friday by Minister of Mines and Energy Bento Albuquerque. Moreover, Brazil has a completely different goal to increase oil and gas production and enter the top five world exporters of energy resources.
Oil market experts find it difficult to say how long the downward price trend will last. At the same time, financial market experts note stability in the global financial system, which central banks are actively providing with liquidity. According to financiers, there is no reason for a massive financial shock.
Viral stories similar to coronavirus are not the first time to appear, so there is reason to suggest that sooner or later the challenge will be overcome. Another question is how long the markets will be influenced by the coronavirus factor.
Nury AMANOV
