Page 6 - DMEA Week 05

DMEA COMMENTARY DMEA
Coronavirus the focus of major oil policy decisions
The coronavirus outback in China has put pressure on oil markets, and not just governments
GLOBAL
WHAT:
The coronavirus outbreak in China has wide- ranging repercussions.
WHY:
The impact of the virus on China’s economy will affect economies and commodities worldwide.
WHAT NEXT:
OPEC is considering steps to keep oil prices high as lower demand from China kicks in.
THE news of the coronavirus has been changing by the day and this unstable scenario poses chal- lenges for those trying to manage and deal with the oil market.
e eyes of the world have been xed on the health risk from the outbreak of the coronavi- rus in Wuhan, China, but with global travel and trading the virus has the potential to a ect many activities. One of these is the world’s nancial system which has been hit, with markets from Wall Street to Tokyo declining.
China’s National Health Commission con- rmed on January 29 that the coronavirus had infected 7,700 people, and there had been 170 deaths; by 3 February these numbers had climbed to 14,000 and 305 respectively. e virus, which was rst discovered in the Chinese city of Wuhan, has spread to other major cities such as Beijing, Shanghai, Macao and Hong Kong.
e outbreak coincided with the Chinese New
Year, when travel and spending typically spikes. Many Asian stock markets were closed on Monday for the holiday, but concerns about the impact of the virus on the Chinese economy were felt globally, weighing on travel and fashion com- panies, including luxury brands L’Oreal, Hermes and Burberrys. e education sector with many Chinese students studying abroad is also at risk. Oil prices also dropped more than 9% during the week, with Brent crude falling to $55.66 a bar- rel, as traders fear demand could drop if China’s economy stalls. “ e timing [of the outbreak] could not have been worse,” analysts at Oxford
Economics said in a research note.
In an attempt to slow the spread of the virus,
China has announced travel curbs and quar- antines, while companies in the country have advised sta to work from home. Businesses are also o ering workers longer holidays, as well as telling employees returning from the most
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w w w . N E W S B A S E . c o m Week 05 06•February•2020