Oil has reached a 7-week low after concerns over the deadly virus swarming in China, and that the situation will lead to lower demand for raw materials. In addition to the already lacking strong demand for oil.
With the rise of the victims of the virus, the price of oil has fallen by more than 3%. Full restrictions on transportation were imposed in the city of Wuhan, where the virus originated. The city itself has a population of 11 million people. The World Health Organization has not yet decided whether to declare the global pandemic situation.
The organization will have a meeting again tomorrow to define an action strategy.
The drop in the price of oil is a true expression of the serious concern that such a serious damage could cause to such a virus on transport and travel, and consequently on the demand for oil.
Goldman Sachs has warned that global oil demand could drop by 260,000 barrels a day this year as a result of the respiratory virus. If an epidemic similar to the SARS epidemic in 2003 happens again, oil could fall in price by $ 3.
The market response to the suspension of Libya’s exports remains ignored at this stage. US production is expected to expand further. Separately, Kuwait intends to continue oil production, which has been paused for 4 years so far.
Source: Bloomberg Finance L.P.
Graphs: Used with permission of Bloomberg Finance L.P.
Trader Martin Nikolov