Coronavirus: Oil prices plunge to 18-year low
Oil prices have tumbled to an 18-year low, dragging down Asian stocks as coronavirus continues to hit economies and Saudi Arabia shows no sign of ending its oil price war with Russia.
Brent crude oil fell 5.7 per cent to $23.52 per barrel this morning, its lowest level since 2002. US crude fell 3.9 per cent to $20.68 per barrel after earlier slipping below $20.
The drop in prices was driven by a sharp fall in demand due to lockdowns and company closures as a result of coronavirus just as Saudi Arabia ramps up supply.
“Both types of crude fell for the fifth straight week with the economic slowdown and price war showing limited to no signs of abating,” said Jim Reid of Deutsche Bank.
Asian markets were dragged lower overnight due to the oil price shock and fears of the damage coronavirus is wreaking on economies.
Japan’s Nikkei index fell 1.9 per cent, China’s Shanghai composite dropped 0.3 per cent, and Hong Kong’s Hang Seng fell 0.8 per cent.
China’s index fell despite the People’s Bank of China cutting a key interest rate by 0.2 percentage points overnight as policymakers try to revive the economy.
Central bank adviser Ma Jun said the Bank still has ample room to support the economy as the country heads back to work.
There are few signs that the oil price will rebound soon. Saudi Arabia said on Friday it is not talking to Russia about ending the rout, despite pressure from the US.
Jens Peter Sorensen, chief analyst at Danske Bank, said the focus of markets today will be on the spread of the virus, especially in the US “where the number of infections and deaths is rising significantly”.
Ian Williams, economist at Peel Hunt, said investors should not expect much more stimulus from government and central banks. He said they will now have to be patient as the scale of the economic damage is revealed.
“Economic indicators will look grim, and this week’s release calendar is dominated by sentiment readings that will likely show unprecedented declines in business and household confidence,” he said.