Crude oil prices dropped as much as 2% over reports revealing the number of people infected with COVID-19 virus particularly in Western Europe and the United States are growing at an exponential level, thereby triggering fears over crude demand, and also the prospect of increased supply also weighed down heavily on oil traders mind.
At the time of writing Brent crude futures was trading slightly above $41/Barrel and the U.S. West Texas Intermediate (WTI) futures dropped as expected below $40/barrel amid the rising U.S dollar index at London’s trading session on Monday.
Over the weekend the world’s largest economy reported its highest number of new COVID-19 infections in two days while France, the EU second-largest economy posted new COVID-19 cases of around 50,000 yesterday underlining the intensity of the outbreak.
With all the prevailing macros distorting an upside move in the sensitive crude oil market, one thing remains clear, oil traders have momentarily given up on crude oil prices posting above $50/barrel at least in 2020, on the bias that the demand cycle recovery seems to be collapsing, not forgetting the aurora of geopolitical uncertainty hitting record highs.
Looking inward with Covid-19 microscope the damage done to the black fossil market becomes so very real and damaging.
However, amidst this carnage, the Saudis and Russians are stepping up their game by offering unwavering support. Taking to account Russian leader Vladimir Putin’s recent statements on his willingness to extend the current level of crude oil production cuts beyond 2020, would definitely support crude oil prices in the near term, meaning it’s very unlikely Brent crude prices trade below $35/barrel in 2020.
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This article was originally posted on FX Empire