Corona-Virus? Whats that got to do with the price of oil!?

Posted on 11th February 2020

Corona-virus is quickly becoming a world wide epidemic, but how does it affect the financial world?

As im sure we're all aware Corona virus is currently spreading around the world like wildfire. Without airfare we wouldn't be any where near where we are today, as a developed global economy. It allows us to transfer information and items around the world in a matter of hours, reach destinations and corners of the earth that would have taken weeks not so long ago. However... a hidden talent of airfare could be one of our biggest downfalls, with the ability to move people around the world in their millions in a matter of hours, comes the ability to move illnesses with them. That's exactly what we're doing with corona virus! Anyway less of that, lets talk about how it affects all of us sat at our computers, buying stocks, selling currencies and trying to make a few quid while doing so! 

With China effectively shutting down huge parts of it's country blocking transport routes and cancelling public transport, Victims with the virus aren't the only ones to lose out in 2020. The price of oil has also taken a sizeable hit, reaching $50 a barrel pretty quickly after the outbreak.. but why? China are huge users of oil and with chinas infrastructure coming to a brief halt, the demand for crude oil fell and boy.. so did it's price! Oil was enjoying a strong start to 2020 getting as far as $65 a barrel, but with one of it's biggest consumers now out of the game, albeit for a brief period oil is struggling to find it's feet. We don't know the extent of outbreak and how bad it's going to get, but it looks like we've met our price for oil's current demand at the $50 mark. 

So.. the big question, is the price going to recover? The logical answer is yes, however if this outbreak get worse it wouldn't be unreasonable to start looking at the $42 a barrel mark, but we need to wait and see and only time will tell. My market bias would definitely be long as it's a fundamental impact on the price, not a technical one, so once that fundamental pressure eases so would the pressure on the price. $65 a barrell is definitely in the eyes of the buyers, but how long it will take to get there and how hard they will have to fight is a guessing game at this point! 

The price of oil also has a knock on effect on the canadian dollar, with one of Canada's biggest exports being oil they're really feeling the squeeze on their currencies price in the market. This again doesn't look like it's going to last forever as techinal traders are seeing the big "SALE" sign on canada's currency and the buy orders are starting to trickle in. 

Again we're waiting to see what happens with the australina dollar as they're also huge exporters into china.. and the like the CAD people are seeing how cheap it's floating around in the market and are starting to pick it all up.

All in all, in time of crisis like this it's difficult to say what will happen as it seems no one really knows the severity of the current situation with Corona-Virus in terms of how far and wide it will spread, but all we do know is that it's weighing in the markets. 

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