Oil prices continue to fall as coronavirus fears hurt energy markets

oil prices

While biotech and healthcare stocks have enjoyed some gains, with companies directly involved in working on a coronavirus vaccine surging the most, other markets have been harshly hit by the ongoing epidemic. Global energy markets have been taking a pounding over the past few days, with oil prices in particular dipping on Monday as the death toll continues to grow.

Prices of international benchmark Brent crude fell down to as low as$54.17 per barrel on Monday, which is a 4% drop and represents the lowest price seen in over a year. So far, the commodity has lost over 20 percent of its price since early January, where prices were hovering around $70 per barrel. That’s a substantial decline for such a short period, one that has left many oil-producing nations worried about what to do next.

OPEC and its ally countries are now considering emergency production cuts as prices seem to have reached a bear market. Back in 2019, the group of countries stated that they consider $50 the minimum price they would let oil fall before implementing new price cuts. Although the biggest problem at the time was the growing energy output from America, coronavirus fears have now become the dominant reason for the global energy market’s recent losses.

According to the Financial Times, the Kremlin has confirmed that Vladimir Putin had taken a call from Saudi Arabia’s King Salman, with a major point of discussion being the global oil market and efforts to stabilize prices. Both sides were apparently ready to “further co-ordinate their actions…to ensure stability on the global oil market” ahead of the upcoming meeting between oil producing nations.

OPEC nations and allies are scheduled to come together to assess the situation this Tuesday and Wednesday, with talks focusing on whether to restrict another 500,000 barrels per day in output to help stabilize prices. In the month of December, total output between the OPEC nations came at 29.4 million barrels per day, so a half a million b/d cut would less than a two percent decline in supply. Considering just how severely the oil market has been hurt, it wouldn’t be surprising if the group decides to cut output even more.

According to some analysts, the total demand reduction attributable to the coronavirus would come in at around 1 million barrels per day, a figure that’s likely to remain the same for the first three months of 2020. Citigroup has cut its price target for oil by a whopping $18 per barrel, with an overall price target of just $50 per barrel for the second quarter of 2020.

At the moment, there are over 20,600 confirmed cases of patients with coronavirus, with over 20,400 of them coming from China. Although the death toll has climbed to 427, the number of patients that have successfully recovered from the illness has reached 669. Although the rate of new infection growth has seemed to slow down a little, it’s likely that the number will continue to grow for quite a while more. Until then, global energy markets are expected to continue to fall unless something is done about it.