There are a lot of things about the coronavirus scare that are surprising. The abandonment of any hint of logic by both the public at large and financial markets would be one. Staying clear of Corona beer and boycotting Asian restaurants whose owners and staff have probably never even been to China spring to mind from the general public, while global stock markets are pricing in massive declines in GDP and corporate profits at this early stage would be the most obvious, possible overblown, market reaction.
For the oil market specifically, the fact that a major announcement from OPEC this week went almost unnoticed seemed the most surprising, until you read the proviso to the announced production cuts. They still had to be approved by Russia, and this morning there were reports that that wouldn’t happen. Subscribers to Oil Price Alerts won’t have been shocked by that, as I wrote in a subscriber e-mail written yesterday that it was a risk.
My point was that Vladimir Putin plays the long game, and if he perceives this market turmoil as doing more damage to European nations and the U.S. than it is doing to Russia, he will take the short-term pain for possible long-term gain. Right now, that looks to be the case.
Still, the reaction to that news, like just about everything else at the moment, looks like being overdone, or will be quite soon.
Even if Russia doesn’t join there may still be further cuts from other producers, as well as market-driven…