The price of oil, at its lowest since January 2019, went down on Monday amidst fears of a slowing down in the Chinese economy stricken by the coronavirus, and before an important meeting of the petroleum exporting countries (OPEC).
About 6:25 PM, a barrel of North Sea Brent crude – on its first day of use as a reference contract – for delivery in April, was worth $54.81 in London, a drop of 3.20% compared to Friday’s closing price. A barrel of WTI oil for delivery in March fetched $5.36 over the same period, a decrease of 2.33% after having touched the $49.92-mark around 5:50 PM.
Both reference indices have ended up in the red during the past three weeks, and January 2020 alone saw declines of more than 10%. “WTI and Brent are once more in the red, investors are concerned about a fall in demand in China,” CMC Markets David Madden reacted.
They have been undermined for several weeks by the impact of the viral coronavirus epidemic, which has hit more than 17,000 people with 361 deaths in mainland China (bar Hong Kong and Macao), on the economic health of the world’s leading importer and second-largest consumer of oil.
In response, OPEC and its Russian ally are going to hold a technical-level meeting on Tuesday and Wednesday in Vienna, home to the cartel’s headquarters, in an attempt to halt the fall in prices. A recommendation to cut production by a further “500,000 to 1 million barrels a day” could well be the result, Craig Erlam, an analyst at Oanda, considered.
Algerian and Russian energy ministers Mohamed Arkab and Alexander Novak last week also raised the possibility of bringing forward the next meeting of OPEC ministers and its allies originally planned to take place on 5 and 6 March.
The market will judge whether such an effort will be enough to stabilise a situation involving a market in surplus and demand from China “expected to be down by 3 million barrels per day,” FXTM analyst Hussein Sayed had reported earlier in the day.