On the morning of Monday, January 6, 2020, WTI crude oil was nearing $64/bbl. As of 10:31 a.m. EST on Thursday, February 27, 2020, WTI crude oil was trading at $46.36/bbl. The shocking effects of the coronavirus fear continue to decimate global markets, particularly oil markets. Fortune.com aptly points out that the coronavirus has done to the oil industry what the U.S. and China trade war, strikes on Saudi oilfields, Libyan supply outages, and a near war between the U.S. and Iran-could not. The virus has thrown traders and analysts into complete turmoil.
2020 started out with optimism about global oil demand. At the end of 2019, after months of uncertainty resulting from a seemingly never-ending trade war, the U.S. and China finally agreed to a Phase 1 deal that appeared to send the markets in the right direction. The coronavirus outbreak in China quickly erased all hope of a strong start in the first quarter of 2020, but it briefly seemed to be contained. The next growing hurdle is the spread of the virus outside of China. The Director-General of the World Health Organization (WTO) said that, “the number of new cases reported outside China exceeded the number of new cases in China for the first time.” The global spread of the virus sent crude oil spiraling down once again, blowing through technical trading levels and creating more uncertainty than we have seen in quite some time.
Part of the problem with the global expansion of coronavirus cases, is that the countries it’s showing up in are major economies. Japan, Italy and South Korea all have major international economies, and they are all dealing with growing virus cases. South Korea just saw its largest daily spike of new infections, Italy has seen a 25% surge of new cases in the past 24 hours, and Japan is preparing to close all of its schools nationwide until late March. Yesterday the U.S. President Donald Trump addressed the nation saying that the country is “very, very ready” for a potential U.S. outbreak, but the markets did not respond positively and continued lower.
There is currently no end in sight for the coronavirus, and the markets are still ignoring any bullish news such as the EIA inventory report or the 1 million bpd supply disruption from Libya. The global quarantines continue to increase, and global demand for crude oil continues its freefall.