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Effects of the Coronavirus on the Oil Market – Daily Flash Briefing

March 10, 2020 by Bautis Financial
Barrels of oil

Drama in the oil industry is escalating, on top of the already concerning effect of Coronavirus on the markets.

On top of the Coronavirus fears that have spooked the markets over the past couple of weeks, there is now some drama in the oil markets to add to the volatility. 

OPEC (The Organization of the Petroleum Exporting Countries), which controls the supply and price of oil, couldn’t come to an agreement last Friday on production cuts in the fact of the Coronavirus economic slowdown.

As a response, over the weekend, Saudi Arabia said it planned to cut oil prices, which would unleash a torrent of crude oil into the well-supplied energy markets. 

At first glance, you would think that lower oil prices — along with interest rates lowering over the past couple of weeks — would be great for the consumer… except that lowering oil prices can also lead to or signal a recession. 

There’s still a large part of the U.S. economy dependent upon the energy industry, and if oil prices are at $20-30 a barrel, it doesn’t make sense for a lot of energy companies to continue on with their drilling and exploration projects, which leads to job cuts and an uptick in unemployment. 

If you couple that with the fact that travel overall, and demand for energy, is falling even faster, there is continued fears that we will experience a recession. 

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Category: Finance NewsTag: COVID-19, Market Volatility, Oil
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