Coronavirus Dominates Energy Market News
February 4, 2020
The news for the energy market is still all about coronavirus. BP’s Chief Financial Officer, Brian Gilvary said that the global economic slowdown in the wake of China’s coronavirus outbreak is set to reduce global oil demand in 2020 by up to 0.5%. It was suggested yesterday that I go look at videos of the streets of Shanghai on you tube, which I did, and activity looks pretty sparse. I have seen reports that half of China is shut down and unfortunately the half that is shut down is where the vast majority of production and exports take place. These issues are what has created the fear driving the selloff in energy prices.
The energy markets have tested key support levels and the markets are trying to bounce here this morning. Reports about OPEC moving up their March meeting and cutting more production is the biggest news supporting this bounce. OPEC’s Joint Technical Committee will meet today and tomorrow to talk about the impact to demand from coronavirus. OPEC is trying to move its meeting up to February 14th from the normal schedule in March. These markets have been beat down and are overdone to the downside and are due for a bounce. But we will have to see how far the bulls can rally this market as they have a lot of work to do to change the trend. If prices are able to hold up the market is likely to continue to trade in a range until this coronavirus virus and China get some good news.
Also seeing news of OPEC cutting production all the way from 500,000 bpd up to even 1 million bpd. OPEC will very likely need to do something to try and support prices but how much is still unknown as the coronavirus continues to spread and the true demand destruction is still unknown at this point.
On the first day of trading in China since the Lunar New year holiday, investors erased $393 billion from the country’s benchmark equities index, sold the yuan currency and sold off commodities as coronavirus fears dominated the markets.
Iran’s President Hassan Rouhani said Iran is ready to cooperate with the European Union on issues related to the nuclear deal it agreed with world powers in 2015. He made the comments at a meeting with Josep Borell, the head of the EU’s foreign services, who traveled to Iran to try and reduce tensions in the Middle East after the US killing of Iranian military commander Qassem Soleimani in January.