Oil prices plunge to lowest in more than four years

Demand contraction

China’s efforts to curtail the coronavirus outbreak has disrupted the world’s second-largest economy and curtailed shipments to the biggest oil importer. The virus has also spread to other major economies such as Italy and South Korea.

The International Energy Agency said on Monday oil demand was set to contract in 2020 for the first time since 2009. It cut its annual forecast by almost one-million bpd and that the market would now contract by 90,000 bpd.

Major banks have cut their demand growth forecasts. Morgan Stanley predicted China would have zero demand growth in 2020, while Goldman Sachs sees a contraction of 150,000bpd in global demand.

Goldman Sachs also cut its forecast for Brent to $30 for the second and third quarters of 2020.

In other markets, the dollar was down sharply against the yen, Asian stock markets sharply lower, and gold rose to its highest since 2013 as investors fled to safe havens.

Chris Weafer, director at Macro-Advisory consultancy, said Russia return to co-operating with Opec by about September if prices remained very low as President Vladimir Putin “will be reluctant to run down financial reserves too far to fund an expanding deficit”.

Reuters