Global panic over the spread of the novel coronavirus outbreak in China has thrust the oil markets towards the bear market territory, amid its optimistic performance in early January. Oil hit highs early this month after Washington and Beijing have drawn the first phase of their trade deal, temporarily easing tensions between the two economic superpowers.
However, the new market enemy has emerged after the novel coronavirus has created market uncertainty as it heralded a global emergency announcement from the World Health Organization (W.H.O.).
Oil markets dropped 21.4% from early January high as the tension between Iran and the United States intensified, and analysts are looking at the outbreak as another force that will pressure the global oil market into a significant low. West Texas Intermediate was at $51.59 per barrel Friday, after trading as high as $65.65 in early January.
“This is a worst-case scenario for them—a hit to demand in China,” said John Kilduff, partner with Again Capital.
As a response, the Organization of Petroleum Exporting Countries (OPEC) and their allies, including Russia, are planning to push their scheduled meeting from March to an earlier timetable. Kilduff added that whenever the preponement would push through, the organization its allies will impose further cuts as justified by the crisis and on emergency-basis.
On Friday, Russian Energy Minister Alexander Novak confirmed that the group is planning to move their meeting forward, but they still need a little more time to observe the situation and determine their next move.
“If you’re going to meet early, then you had to do something,” said Helima Croft, head of global commodities research at R.B.C. “I don’t think you would call an early meeting just to roll it over.”
Some speculate that the meeting will be moved to as early as the next coming week.