Oil prices soar as coronavirus cure rumours fuel optimism
Oil prices broke three weeks of consistent falls today, soaring four per cent as markets reacted wildly optimistically to reports that a breakthrough had been made in the search for a coronavirus cure.
Global benchmark Brent crude gained almost $2 to reach $55.91, an increase of 3.6 per cent. West Texas Intermediate shot up 3.5 per cent to $51.34.
The outbreak of the disease had knocked prices into a downward spiral, but the announcement from China’s Health Commission that a treatment has been found has raised market hopes that the worst may be over.
Since the beginning of the month, analysts estimate that China’s oil imports have fallen from 11m barrels a day to somewhere closer to 7m as its economy stalled.
According to outgoing BP finance chief Brian Gilvary, the outbreak may hit global demand for the whole year by as much as 500,000 barrels a day, or 0.5 per cent of worldwide demand.
Traders will be hoping that today’s respite will turn into something more permanent. Edward Moya, senior analyst at Oanda, said:
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“Oil’s bloodbath could be over after researchers announce the breakthrough in creating a coronavirus vaccine. Energy traders might start pricing a return to normalcy in Chinese demand for crude in the second quarter.
“Scientists will need a lot more time to test and confirm the recent breakthroughs, but West Texas Intermediate crude might not wait to retest the mid-$50s as optimism will run high that the demand shock for crude is nearing an end.”
The World Health Organization has urged caution over reports of a cure, saying that there are “no known effective therapeutics” against the virus, which has now killed nearly 500 people.
Oil cartel Opec’s joint technical committee met for a second day today in Vienna to assess the damage that the outbreak has done to global demand, with an additional cut of 500,000 barrels a day mooted.
The group is already curbing supply by 1.7m barrels a day, but may be forced to deepen cuts in order to sustain prices.