Oil Price Fundamental Daily Forecast – Could Plunge if WHO Declares “Global Emergency”

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower on Thursday after a two-day counter-trend rally. The markets are currently in a position to take out their recent multi-month lows set earlier in the week.

Driving the markets lower are worries over the economic impact of the coronavirus in China, and another rise in U.S. crude oil inventories. Traders seem to be shrugging off reports that OPEC and Russia stand ready to make adjustments to meet the expected drop in demand by increasing their current production cuts, or extending their current reductions into June.

At 12:57 GMT, March WTI crude oil futures are trading $52.05, down $1.29 or -2.42% and April Brent crude oil is at $57.36, down $1.55 or -2.63%.

Coronavirus Impact

The selling resumed on Thursday after prices steadied for two days, following a steep break that drove the market into a three-month low earlier in the week.

After trying to assess damage from the virus to economic growth and demand for crude and its products, the selling restarted Thursday on reports of a rising death toll and the spread of the virus around the world.

The World Health Organization’s (WHO) Emergency Committee is set for another meeting later on Thursday to reconsider whether the rapid spread of the virus should now be called a global emergency.

Airlines around the world are suspending or reducing direct flights to China as travel warnings are issued by governments and passenger numbers drop. This is causing a rapid rise in airline fuel supply as well as denting refiner profits.

U.S. Energy Information Administration Weekly Inventories Report

On Wednesday, the EIA said crude stocks rose by more than seven times market expectations, gaining 3.5 million barrels in the week to January 24. Gasoline stocks rose to a record high, increasing for a 12^th consecutive week to 261.1 million barrels, the EIA said.

Libya Supply Woes Offer Some Relief

Although the focus is primarily on demand, traders are reminded that outages in Libya should be watched.

“While demand is a real concern, it’s important not to forget about the supply disruptions from Libya – if these losses persist, it would be enough to swing the market into deficit this quarter,” ING said in a note.

Daily Forecast

Traders should pay close attention to the announcement from the WHO. Prices could plunge if it declares the coronavirus a “global emergency”.