31FX – Oil prices plummeted this week and continue to be part of the bearish market as weaker oil demand, the US-Iran tensions, and most recently the coronavirus outbreak greatly affects investors’ sentiments and the market’s overall attitude towards protecting their own financial interests.
January 20, 2020 Prices
Brent Oil: 65.765 WTI Crude: 59.283
January 24, 2020 Prices
Brent Oil: 62.007 WTI Crude: 54.766 (down by 377 points) (down by 451 points)
WTI is down by 9% this year, and Brent is down by 6% and might its biggest losing month since August 2019.
Libya Shutdown vs. Increased US Fuel Supply
Libya’s oil shutdown early this week was expected to cause higher prices in the market. It’s national oil company cut 800,000 barrels per day after loyal forces under Khalifa Haftar closed a pipeline near a coastal city which limited oil production on two of the country’s biggest oil fields. This power move has become a political weapon for both Libya’s east and west governments.
Despite this major event, oil prices continued to fall as US fuel supplies increased by Thursday as reported by the US Energy Information Administration (EIA). Larger oil supplies all over the world were also in view within the week and further pushed down the prices.
Corona Virus Outbreak
Prices reached 9 -week lows by Thursday as the coronavirus rattled the market due to its global risks, almost reaching a worse monthly loss since May 2019. The oil market opened the year with good spirits as the US-Iran tensions created bigger volatility but have now paled in comparison to the recent news of a global virus outbreak.
Analysts gave warnings on weaker economic activity, particularly global travel, as 26 deaths and almost more than 800 cases of coronavirus patients worry the common folk and traders alike. Goldman Sachs reported on Tuesday that they expect a 170,000 barrels per day decrease on jet fuel demand, which was based on the 2004 SARS epidemic. It made a huge dent in the oil market history.
The World Health Organization has yet to declare the virus outbreak as a global health emergency, and market players are holding this as a good indicator for a pacified outlook in the coming weeks. As of writing, oil prices are slowly climbing, getting ready for the market correction and we can expect a good trend to ride on, so better to take advantage of this golden market event.
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