What awaits the oil market in the near future? Review for February 2020 how Coronavirus affected. 

Alexey Gulyi, EverFx.com Senior Analyst, said that since the beginning of this year, the oil market has seen some dramatic developments. As a result of the escalation of the conflict between the United States and Iran - the culmination of which was the killing of Iranian General Suleyman by the US in early January - the price of WTI oil reached an 8-month high, exceeding the mark of $ 65. However, on February 4, the cost of “black gold” fell to an annual minimum as a result of the outbreak of the coronavirus epidemic in China, which claimed the lives of over 1000 people, with over 45 thousand infected. As a result of the epidemic, the demand for oil in China - the largest importer of the resource - decreased significantly. Subsequently, the market was left with a surplus of oil.

On February 6, a meeting of the OPEC + Technical Committee was held in order to assess the current situation and make recommendations on measures necessary to stabilize the market situation. Following the meeting, the committee recommended increasing the reduction of daily production by 600 thousand barrels in addition to the current agreement to reduce output by 1.7 million barrels. OPEC sources said that some cartel member countries called for an emergency meeting that could have been held on February 14-15 instead of the meeting scheduled for March 5-6. However, the convening of an unscheduled meeting was hindered by Russia’s position. Energy Minister Novak said it would take more time to assess the situation.

On February 11, a reduction in the number of new cases of coronavirus infection was recorded, which gave reason to believe that the peak of the epidemic could occur this month. Against this background, the demand for risky assets - in particular oil - increased as a result of an upward correction.

The further trend for oil will depend on two key factors: the dynamics of the spread of Coronavirus and OPEC + solutions. If Russia supports an additional reduction in production, the upward correction may continue to the target level of $55. In the case of a further slowdown in the spread of Coronavirus, a medium-term trend reversal is likely, and the price will return to $60. In an alternative scenario, a downtrend…

Unlock the rest of this article with a 14 day trial

or Unlock with your email

Already have an account?
Login here