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How Low Will The Coronavirus Send Oil Prices?

A number of developments this week, including Haftar’s actions in Libya, would normally have moved oil markets significantly, but in today’s market, it is only those that are to do with demand that seem to have any influence.

- Travel restrictions and a dangerously spreading virus are dragging oil prices down. Goldman Sachs sees a potential drop in oil demand in China due to the outbreak of the coronavirus, which has now spread across the country, with 830 confirmed cases as of Thursday, and 26 confirmed deaths, along with one confirmed case in the United States and cases reported in Thailand, Japan, Taiwan and South Korea. Goldman predicts this outbreak could slash Chinese demand and shave $3 off a barrel of crude. The math here mirrors what happened in the 2003 SARS outbreak, which leads Goldman to believe that there is the potential for demand to lose 260,000 barrels per day and “shock” global oil demand. Goldman is adding 170,000 bpd loss of jet fuel demand in its calculations. The SARS virus caused a slowdown that was much smaller than what Goldman is projecting. The logic behind the fear that the slowdown could be much worse this time around is that Asian air travel has enjoyed rapid growth since the early 2000s, so the slowdown in air travel and the reduced use of jet fuel could be compounded. In other words, there’s more to slow down this time. At the time of writing, Brent has fallen to $60.88 and WTI to around $55.

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