Oil prices continue to fall due to fear of recession in China

  •   28/01/2020 - 16h08
  •   Adeline HARMANT

The price of oil has just reached its lowest level in three months as the current coronavirus epidemic in China raises fears of a recession in that country's economy and global growth and thus in energy demand. Let's decipher this data and its likely repercussions together.

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Oil prices continue to fall due to fear of recession in China
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Oil is in the red today:

Oil prices are currently on a clear downward trend, penalized by the spread of the Chinese epidemic and its impact on the demand for black gold. During yesterday's session, the price of black gold reached its lowest level since October with a barrel of Brent trading at 59.32 dollars on the London market, i.e. a fall of 2.3% and a barrel of WTI which lost 1.9% of its value on the same session with a price of 53.14 dollars.

This fall in prices had already started last week with a 6.4% decline in Brent and a 7.4% decline in WTI.

 

Fears about the Chinese economic slowdown :

At the root of this loss of points are, of course, investors' fears about a possible slowdown in growth in China but also in the world, which would of course have a direct impact on the crude oil market.

The need for gasoline tends to drop when the economy is sluggish. It should be remembered here that more than 100 people have already died as a result of this virus in China since it appeared in December. In addition, the government's increasing efforts to curb this contagion within and outside the country are also a concern for markets. It should also be noted that in just 24 hours, the number of suspicious cases has doubled and 56 million people are now cut off from the world in Hubei province as a result of the blocking measures. Xi Jinping's intervention on Saturday announcing the seriousness of the situation and the acceleration of the epidemic also plays against the black gold.

 

How is the price of black gold likely to behave in the coming sessions?

In the face of the sharp drop in oil prices, the Saudi Energy Minister was confident that the virus would be quickly contained. He also announced that Saudi Arabia was closely following developments in China and that the virus was having only a very moderate impact on global demand.

However, some analysts question whether the virus will continue to progress, in which case it would of course cause longer-term disruptions in the event of an outbreak.the main risks to oil demand in the world are a further quarantine and a general slowdown in economic activity, which would then have an effective impact on global oil demand.