Brent crude madea new 13-month low on Monday around $53.11 on news that potentially deeper OPEC+ cuts may not occur soon. The spreads in the futures markets are signaling weaker demand, with the discount on spot prices widening further. This year, Brent crude has dropped by more than 18% and by 25% from its January peak of $71.75.

2020 was supposed to put an end to the global manufacturing slump after the US and China reached their “phase one” trade agreement. It was expected that Europe wouldbegin to shine again due torenewed  Chinese demand after the signing of the trade deal. But no one expected a coronavirus outbreak that wouldinterrupt economic activity in China and spread globally.

Now it’s no longer a question of whether the coronavirus epidemic will lead to an economic slowdown, but how painful this slowdown will be. The scale of the impact can only be determined when the spread of the virus begins to slowdown and the outbreak gets under control, which is not the case at the moment.

Chinese companies were supposed to return to work on Monday, but many car plants and other manufacturers have remained closed following the new year holiday. State refiners such as PetroChina, Sinopec Corp and CNOOC have all announced cuts to their refinery runs totalling approximately 940,000 barrels per day. In fact,this number will be much bigger if youtake into account independent refiners.

Given that China’s oil demand has fallen by more than three million barrels a day, the country may need to cut imports for several months to come. Until then, supertankers may need to store oil,which means inventories will begin to build-up excessively.

That’s why OPEC+ may need to make a quickdecision very soon to prevent prices from slumping further. Russia seems to be the main obstacle against cutting production at this stage. But if the coronavirus continues to spreadand we don’t see a response from the cartel, expect oil prices to remain in a freefall.

Disclaimer:This written/visual material is comprised of personal opinions and ideas. The content should not be construed as containing any type of investment advice and/or a solicitation for any transactions. It does not imply an obligation to purchase investment services, nor does it guarantee or predict future performance. FXTM, its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness of any information or data made available and assume no liability for any loss arising from any investment based on the same.

Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 90% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Analysis


Latest Forex Analysis

Editors’ Picks

EUR/USD challenges weekly lows after mixed Durable Goods Orders

US Durable Goods Orders were up a measly 0.4% in August, missing expectations of 1.0%, although Nondefense Capital Goods Orders ex Aircraft jumped 1.8%. Equities bounce from lows, but the dollar maintains its strength.

EUR/USD News

GBP/USD loses 1.2700 as the dollar keeps rallying

GBP/USD approaches its weekly low at 1.2674 as demand for the American currency extends into the final trading session of the week. Hopes for a UK trade deal with the EU doing little for Sterling.

GBP/USD News

Gold: Finally some rest bite as XAU/USD holds at $1865 per ounce

It has not been the best week for the gold bugs as the yellow metal has fallen 4.36% since Monday. At the end of the week, the price has started to consolidate at the USD 1865 per ounce area. 

Gold News

Breaking: ​​​​​​​The IRS makes it hard to pretend you don’t have Bitcoin

The cryptocurrency holders might have a hard time trying to hide their Bitcoins or other digital assets. IRS considers changing the standard 1040 form by including a bold question on the front page:  At any time during 2020, did you sell, receive, send, exchange, or otherwise acquire any financial interest in any virtual currency? 

Read more

WTI moves back to flat and once again trades above $40 per barrel

It has been a mixed Friday for WTI as the price is moving sideways heading into the weekend. All of the excitement was last week when the OPEC+ JMMC decided to keep output levels at their current rate until December.

Oil News

Forex Majors

Cryptocurrencies

Signatures