Global Emergency Declaration Causes Tailspin In Crude Prices

However, ING says crude market could still swing into deficit this year: File Image/PixaBay

Unsurprisingly, the World Health Organization declaring the China coronavirus to be a global emergency stoked fears of an economic slowdown and corresponding decline in crude demand, and on Thursday this resulted in oil prices plummeting over 2 percent for the seventh negative session in eight.

Brent fell $1.52, or 2.5 percent, to settle at $58.29 per barrel, while West Texas Intermediate fell $1.19, or 2.2 percent, to settle at $52.14 per barrel.

The WHO's declaration seems to have stopped any debate over the potential severity of the virus, and Olivier Jakob, founder of Petromatrix, noted that "The market is really driven by Asia and the China virus; the only thing that can change the current trend is an emergency OPEC [Organization of the Petroleum Exporting Countries] meeting.

"The Libya outage is not providing much of a floor; only an additional OPEC cut could change things."

But not everyone is confident that the cartel has much sway in a world energy market now dominated by the U.S.: John Driscoll, chief strategist at JTD Energy Securities, told media that "I have to say this delicately, but OPEC, I think, is starting to realize that even though they cut back, try to balance output and stabilize prices, they have less influence.

"That is simply because the balance of power has shifted."

Meanwhile, energy producers are girding for what they forecast as a challenging 2020: Ben van Beurden, CEO of Royal Dutch Shell, on Thursday said, "I think we have to prepare for a tough and uncertain macro, [and] we do that in our company by making sure that our investments are resilient … I think that's the best way to inoculate ourselves against an uncertain future."

He added, "At this point in time, sentiment in oil markets is not so much sentiment about supply, it is all sentiment in demand."

But as if to prove that even convictions of waning demand coupled with rising inventories can turn on a dime, ING stated in a note that "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."