The coronavirus is having a greater impact globally than initially thought, and it’s spilling over into oil prices. The International Energy Agency (IEA) is expecting demand to fall for the first time in 10 years, which doesn’t bode well for bullish oil traders.
Per a Business Insider report, the demand for oil “will be 435,000 barrels less per day versus the first quarter of 2019, the Thursday report said. The agency also cuts its growth projection for 2020 to 825,000 barrels per day, a reduction of nearly a third from its previous target, and the lowest growth forecast since 2011.”
The growth target also represents a lower figure than the one forecasted by the Organization of the Petroleum Exporting Countries (OPEC). OPEC cut its oil supply projection by 230,000 barrels per day to 990,000 barrels per day.
Once again, the coronavirus is the prime factor for the IEA’s reduced figure as it cites the impact of the virus in the first quarter of 2020 will be “significant.” The U.S. stock market, however, appears to be sloughing off the effects of the virus as the major indexes are on their paths to new highs.
The report added further that “China announced Thursday a massive 15,000-person spike in coronavirus cases, bringing the total number of people infected to above 60,000 and the death toll to 1,366. Businesses across industries have seen Chinese sales plummet amid the outbreak, and U.S. names like Starbucks, Disney, and Nike have shut down some Chinese locations in response to the outbreak.”
In Thursday’s market session, Brent crude, the global oil benchmark, fell as much as 1.49%, while WTI crude fell 1.11%. ETF traders looking to get in on the price action by sensing a buy-the-dip opportunity can look at the United States Oil Fund (NYSEArca: USO).
USO is down 15.9% year-to-date based on Yahoo Finance performance numbers. USO seeks the daily changes in percentage terms of its shares’ per share net asset value (NAV) to reflect the daily changes in percentage terms of the spot price of light, sweet crude oil delivered to Cushing, Oklahoma, as measured by the daily changes in the price of a specified short-term futures contract on light, sweet crude oil called the “Benchmark Oil Futures Contract,” less USO’s expenses.
USO seeks to achieve its investment objective by investing primarily in futures contracts for light, sweet crude oil, other types of crude oil, diesel-heating oil, gasoline, natural gas, and other petroleum-based fuels.
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