Commenting on the effects of Coronavirus on the global oil price Joe Camish, Analyst at Cornwall Insight, said:
“As a result of travel bans escalating and social restrictions imposed due to the Coronavirus worldwide, there has been a sharp fall in global oil demand. This has seen Brent crude oil prices open this morning at just US$28.4/bbl – the lowest level since 2016. This has since fallen to the lowest levels since April 2003, at US$25.1/bbl. The recent trend builds on last week’s price declines which followed the fall-out from the OPEC+ meeting and the decision by Saudi Arabia to increase oil production.
“Although the links between oil prices and Great Britain’s (GB) energy market have dwindled, this dramatic drop in prices is likely to spark further declines in GB wholesale gas and electricity markets. Similar movements have already been seen on associated commodities such as the EU ETS which saw carbon prices fall to a 16-month low this morning of €15.6/t. The collapse in crude oil and industrial activities has dented demand for carbon allowances. We could, therefore, expect to see this act as a price depressive fundamental in the near-term, whilst also offering possible support for previously out of merit technologies in GB, such as less efficient CCGTs and possibility coal-fired power stations. This will also depend on how the Coronavirus will impact gas and electricity demand levels.
“Like most sectors, the energy-related market is going to go through a tumultuous time in the coming weeks and months. While there has been calls for an emergency OPEC+ meeting to discuss rebalancing the market, it is yet to be seen whether an agreement will be achieved.”
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