Crude oil prices recorded their sharpest weekly drop since the 2008 financial crisis amid an increasing focus on the economic impact of the coronavirus.
That triggered fears of weakening demand as COVID-19 spread outside China.
Brent crude dropped to $50.52 per barrel, as WTI retreated to $44.76. This represents an almost 11 percent drop from last week’s highs and a 22 percent drop from this year highs in early January.
The sharp fall in oil prices coincided with a plunge in equity markets as investors weighed the economic impact of the coronavirus outbreak. Stockmarkets also experienced the worst weekly performance since the 2008 financial crisis.
Oil markets experienced a sharp drop in trading, which has led to an expectation of a prolonged period of an oversupplied market, with demand badly hurt as the virus spreads to large oil-importing economies including Japan, South Korea and Italy.
Expectations of an extended oversupplied market has all but wiped out hopes of higher demand in the coming months from China and the wider Asian market — especially because there has been so much flight disruption.
The land and sea transportation networks seem to have overshadowed other market fundamentals.
The petroleum refined product market has also been hit hard on concerns that the outbreak could impact consumer demand. Aviation jet fuel margins tumbled faster than for other petroleum refined products.
Such bearish developments require steeper output cuts by producers inside and outside OPEC to continue their collaboration till the end of 2020. Some analysts have described it as a nightmare scenario for OPEC when the group meets in early March.
It is not just about oil prices now but the stability of the global economy.
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