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Virus Uncertainties Rattle Oil Markets. Here Are The Metrics To Watch

By Ellen R. Wald, Ph.D.CommoditiesFeb 27, 2020 05:26AM ET
www.thechinesenews.net/analysis/virus-uncertainties-rattle-oil-markets-here-are-the-metrics-to-watch-200511228
Virus Uncertainties Rattle Oil Markets. Here Are The Metrics To Watch
By Ellen R. Wald, Ph.D.   |  Feb 27, 2020 05:26AM ET
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News that the coronavirus has spread further rattled equity and oil markets since Monday. The dramatic drops to start the week were spurred largely by reports of outbreaks in Iran and Italy, along with general fears about the disruption to the global economy. The toughest aspect of this crisis for traders is how much is unknown or unknowable.

The two major uncertainties for oil traders:

  1. What will happen with this virus outbreak?
  2. How much is the outbreak impacting oil demand?

The first is unknowable. The second requires us to wait for updated numbers from various international authorities and third-party observers.

Unpredictable Future Of The Virus

Doctors, epidemiologists and other scientists are fighting the spread of this virus, but are also attempting to track it. We know that the outbreak is becoming severe in Iran and is impacting northern Italy.

Reports are conflicting about the likelihood of its spread across Europe, South America and North America. In the U.S. alone, different government agencies like the Centers for Disease Control and the National Institutes of Health offer differing guidance.

Fear is mounting about the extent of the spread of the virus to South Korea and Japan, and even the International Olympic Committee could consider canceling the Summer Games in Tokyo, but we don’t know if the virus will become widespread in either country.

In other words, the experts are uncertain about the future of the virus and whether it will last a long time and sicken many more people. For markets, that means continued anxiety.

Oil prices have fallen this week, largely based on fears of the coronavirus, but we will surely see upward trends—at least a minor one—at times before this is all done.

Nevertheless, until the threat of coronavirus recedes, expect the markets to be on edge with the possibility of further major drops if bad news arrives.

WTI Futures Weekly Chart
WTI Futures Weekly Chart

Impact Could Soon Be Quantified

Something we will soon be able to quantify is how the coronavirus has influenced demand. The outbreak began in China about three months ago, although it did not start to grab international attention until January.

As more data about oil consumption comes out at the beginning of March, we will have a better idea of how oil demand has already been affected.

China should release its oil import numbers, as will various agencies like Platts, OPEC and the IAE. From there, we can examine third party shipping trackers and try to assess demand changes in real time.

Additionally, the OPEC and OPEC+ meetings on 5 and 6 March will reveal more about what that group of producers sees in the market over the coming months.

Meanwhile, the primary points of concern are jet fuel consumption, lower industrial activity, China’s demand (typically China imports about 10% of global oil production).

Bottom line

This could be a tough time to predict the market because so much depends on this virus. However, at times of increased anxiety, there will likely be significant movement, which could provide opportunity for traders.

Virus Uncertainties Rattle Oil Markets. Here Are The Metrics To Watch
 
Virus Uncertainties Rattle Oil Markets. Here Are The Metrics To Watch

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Comments (12)
Abhishek Mall
Abhishek Mall Feb 27, 2020 12:38PM ET
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With due respect i would like to ask you Ellen R. Wald, Ph.D. when the Bottom line of your article itself is full of confusion what does it mean to write you so big article.!!!!!!!!
Kyle Mack
Kyle Mack Feb 27, 2020 12:09PM ET
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Bitcoin is about to hit all time high. And halving soon. GBTC
Jose Emenis
Jose Emenis Feb 27, 2020 11:10AM ET
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When was the last time you saw a dozen cruise ships and 15,000 people quarantined for a month because of the flu?.... When was the last time a doctor treated you for the flu while he was wearing a space suit?
Jozef Drozd
Jozef Drozd Feb 27, 2020 10:56AM ET
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Flu is worse  than corona-virus !!!!!!!!!!!!! 2018-2019 flu season, 647,000 people were hospitalized and 61,200 died. SARS was the same bs. , this  is a market manipulation .
Goran Krivokapic
Goran Krivokapic Feb 27, 2020 10:31AM ET
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Intelligent girl.
Jozef Drozd
Jozef Drozd Feb 27, 2020 10:30AM ET
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Flu is worst then corona-virus ! 2018-2019 flu season, 647,000 people were hospitalized and 61,200 died.
Mark Pennell
Mark Pennell Feb 27, 2020 10:30AM ET
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funny hit👍10 times 👀it went from 2 to 3 back down to 2 10X
Frank Wong
Frank Wong Feb 27, 2020 8:44AM ET
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Precise & clear
Jc Cortes
Jc Cortes Feb 27, 2020 8:43AM ET
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it was a great explanations between the virus and the market. thanks
Luuk Bernard
Luuk Bernard Feb 27, 2020 8:33AM ET
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Over reaction total panic for a flue that kills old and weak people
Dev Nandan
Dev Nandan Feb 27, 2020 7:02AM ET
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Excellent article...Loved it.
Arthur Lynn
Mr_Hoppel Feb 27, 2020 6:59AM ET
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Thank you.
Jose Emenis
Jose Emenis Feb 27, 2020 6:36AM ET
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I wasn't worried about coronavirus until Trump put Pence in charge of fighting the virus....
Luuk Bernard
Luuk Bernard Feb 27, 2020 6:36AM ET
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Everting they touch turns into gold .Awesome duo
Jose Emenis
Jose Emenis Feb 27, 2020 6:36AM ET
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Luuk Bernard - Trump and Pence are going to battle the coronavirus with propaganda written by Rush Limbaugh and Sean Hannity.....
 
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