Coronavirus fears spark market sell-off; OPEC panicking amid concerns over global recession

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Oil prices has reached its 18-month low, hovering within the level of $50 per barrel. All kinds of global trade are suffering from fi- nancial losses in every aspect, something that is witnessed in almost all countries.

The impact of coronavirus is felt in every household, industry, and business enterprise. Schools and colleges will remain closed but for how long? No one knows whether the situation will get worse or better.

However, OPEC will meet this week in Vienna to decide how to face the current low oil prices and figure out how to recover from the deep decline. It seems there is a definite disagreement among its members and Russia for the proposed cuts of one million barrels in the region along with their current volume of 1.2 million barrels. It is evident that Saudi Arabia, Kuwait and the United Arab Emirates will bear the share of the additional one million cut, while others will most likely not adhere to any cuts.

All businesses have been hit hard especially the aviation industry, which experienced a loss of $1.4 trillion and is expected to lose 30 percent of its business due to coronavirus. This will hit back on the oil industry and its refining sector of petroleum products. ExxonMobil and Chevron lost about 14 percent of their trading values on stock value in the open markets. OPEC is going to act especially since the demand for oil in China has fallen by more than 25 percent.

Consumption and demand for aviation fuels for airplanes have fallen by more than 30 percent after airlines cancelled fl ights to and from China, which is the second highest oil consumer in the world.

Therefore, it is hard to predict the short-term impacts on the global recession, which is hard to assess presently and thereby complicates the OPEC process of displaying oil prices and direction. For now, however, there is no good solution for OPEC as long coronavirus is not tamed or until scientists find a solution to kill it, and stop its spread.

Such being the case, it would be better for OPEC to wait and let the global markets behave and act according to the behavior of coronavirus.

It is not time for OPEC to act, especially since the demand is low and there is no appetite to move forward and with dull commercial activity and people being recommended to remain at home. OPEC, it is time to stay away from interfering in international business. Let coronavirus takes its course.

By Kamel Al-Harami Independent Oil Analyst
email: [email protected]

This news has been read 11241 times!