OIL FORECAST: CRUDE CRUMBLES AS CORONAVIRUS FEARS WEIGH ON SENTIMENT, BUT CAN US JOBS DATA STOP THE BLEEDING?
- The novel coronavirus outbreak plaguing China has paralyzed risk appetite and pressured crude oil prices[1] lower as investors reevaluate expectations for a rebound in global GDP growth
- Crude oil now trades in bear market territory owing to the 20% slide from its recent peak owing to the resurgence of volatility
- A freshly inverted US Treasury yield curve reflects the broader breakdown in sentiment over the last month, but another solid NFP[2] report could restore confidence and bolster oil prices
Crude oil plunged a confounding 21.3% over the last 17 trading days and officially places the commodity back in bear market territory. The major selloff in crude oil and movement into safe-haven assets[3] is owed largely to resurfacing global growth fears[4] in light of the international public health crisis that surrounds the novel coronavirus outbreak.
CRUDE OIL PRICE CHART & INVERTED OIL VOLATILITY INDEX
Chart created by @RichDvorakFX[5] with TradingView[6]
Coronavirus concerns have brought travel and trade across China to a pause, which has traders trying to determine the economic cost of the impending healthcare pandemic. In turn, crude oil price action has crumbled alongside the revival of volatility and risk-aversion across the broader market.
Check out these crude oil facts[7]for more information on what affects the price of crude oil.
Oil volatility – measured using Cboe’s OVX Index – has skyrocketed to its highest reading since early October while crude oil prices fluctuate around 16-week lows. Volatility may rise further if appetite for risk continues to deteriorate and could keep weighing negatively on the price of oil.
