The oil price is currently falling further and further. Only on Tuesday we reported on the “slogan” of the International Energy Agency (IEA), which reads “the world is flooded with oil”. So down with the oil price? Yesterday there was a suddenly increased downward pull of oil. We had already suspected that the corona virus was the trigger. And yes, the fear of the consequences of the corona virus, especially for the Chinese market, is having a major impact on the futures market for oil.
Corona virus sends oil price further downwards
WTI oil has fallen from $ 58.78 at the end of last week to $ 55.75 now. Gone are the analysts’ comments of 100 Dollars per barrel, gone are the comments of OPEC, which only in December had cut its production volume even further. Nobody is currently thinking about rising prices. Or even an upward correction for purely market-related reasons? Please keep in mind, dear readers, that something like this can happen at any time! But back to the current events.
The corona virus currently dominates the market. Why? If millions upon millions of Chinese don’t board a plane for the Chinese New Year, and don’t go out to eat for the next few weeks, but stay at home, and so on… we believe that the general economic demand from China will be lower, and with it the demand for oil. So the price of oil is sent down. With regard to the SARS virus from 2003, Goldman Sachs believes that the corona virus can add $3 to the price of oil (on the downside) due to a slump in air travel, according to recent reports.
An analyst from CFRA Research expresses it more pathetically, according to Zerohedge. The currently falling oil price is a “manifestation of concern” about the global demand for oil. So, to put it simply: First the basic statement of the IEA about a “flooded” world market, and now the corona virus, which is supposed to weaken the demand side. A perfect mix for a falling oil price, which we have received this week. In the following chart we see the trend in WTI oil prices since September 2019. The rise in recent months was clearly broken by the recent downward wave.
Preview for this afternoon
Inventories are also an issue today. At 5 pm German time today, the state inventories for crude oil in the USA will be published. Last week they had fallen by 2.5 million barrels. The privately collected and always reported API inventories were off target last week because they showed a small increase in inventories. Also last night API released a plus of 1.6 million barrels. Are we wrong again, or are inventories in the USA increasing after all? That would be yet another reason for a further drop in oil prices. We’ll report at 5:00 p.m.