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Coronavirus, what impact on the price of a barrel of oil?

If the countries of the Middle East show the will to free themselves from the oil trade as the main (or even the only) economic resource, this day has not yet arrived. This is why it might be interesting, in the current context of a coronavirus epidemic, to analyze what impact the spread of the virus could have on the price of black gold.

In an oil context already marked by an overabundance of crude oil, which has forced exporting countries to reduce their production to support prices, and with Libyan production falling by 75% due to the blockage of oil terminals, the news of the coronavirus epidemic is literally like a hair on the soup.

Fear of a drop in consumption

According to economists, the virus could have a major negative impact on world markets by affecting the demand for oil. Indeed, as the number of deaths and infections increases, travel bans will multiply, limiting travel and effectively reducing fuel consumption.

The Wuhan airport has been closed for days already.

Justified fears?

A situation not unlike the one that accompanied the SARS epidemic in 2003. To which Prince Abdelaziz Ben Salmane, Minister of Energy of Saudi Arabia (the world’s leading oil-exporting country, which stated it was monitoring the situation with attention), said that the “extreme pessimism” that had then afflicted the market, “had not led to a significant reduction in the demand for oil”. In reality, therefore, the virus would have more of an impact on psychological factors than on actual consumption.

Indexes that suffer

Thus, it is only these concerns that are currently having an effect on the price of crude oil…The indexes thus fell to their lowest level since October. Shortly before noon yesterday, the price of a barrel of U.S. crude oil WTI (West Texas Intermediate) dropped 3.36% to 52.37, the worst three-day drop since September. Oilers must be longing to hear reassuring news from China…

See also

Why is Saudi oil so important?

Published on 28 January 2020