Weekly Energy Recap: Economic anxiety hits oil prices

Weekly Energy Recap: Economic anxiety hits oil prices
A board displays losses of Germany's share index DAX at the stock exchange in Frankfurt am Main, western Germany, on February 28, 2020. (AFP)
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Updated 01 March 2020

Weekly Energy Recap: Economic anxiety hits oil prices

Weekly Energy Recap: Economic anxiety hits oil prices

Crude oil prices recorded their sharpest weekly drop since the 2008 financial crisis amid an increasing focus on the economic impact of the coronavirus.
That triggered fears of weakening demand as COVID-19 spread outside China.
Brent crude dropped to $50.52 per barrel, as WTI retreated to $44.76. This represents an almost 11 percent drop from last week’s highs and a 22 percent drop from this year highs in early January.
The sharp fall in oil prices coincided with a plunge in equity markets as investors weighed the economic impact of the coronavirus outbreak. Stockmarkets also experienced the worst weekly performance since the 2008 financial crisis.
Oil markets experienced a sharp drop in trading, which has led to an expectation of a prolonged period of an oversupplied market, with demand badly hurt as the virus spreads to large oil-importing economies including Japan, South Korea and Italy.
Expectations of an extended oversupplied market has all but wiped out hopes of higher demand in the coming months from China and the wider Asian market — especially because there has been so much flight disruption.
The land and sea transportation networks seems to have overshadowed other market fundamentals.
The petroleum refined product market has also been hit hard on concerns that the outbreak could impact consumer demand. Aviation jet fuel margins tumbled faster than for other petroleum refined products.
Such bearish developments require steeper output cuts by producers inside and outside OPEC to continue their collaboration till the end of 2020. Some analysts have described it as a nightmare scenario for OPEC when the group meets in early March.
It is not just about oil prices now but the stability of the global economy.


IMF chief sees ‘high degree of uncertainty’ in global outlook

IMF chief sees ‘high degree of uncertainty’ in global outlook
Updated 9 min 55 sec ago

IMF chief sees ‘high degree of uncertainty’ in global outlook

IMF chief sees ‘high degree of uncertainty’ in global outlook
  • IMF had rapidly increased concessional financing to emerging market and developing economies
WASHINGTON: The head of the International Monetary Fund on Monday said the global lender needed more resources to help heavily indebted countries, citing a highly uncertain global economic outlook and a growing divergence between rich and poor countries.
IMF Managing Director Kristalina Georgieva, who has long advocated a new allocation of the IMF’s own currency, Special Drawing Rights (SDRs), said doing so now would give more funds to use address both the health and economic crisis, and accelerate moves to a digital and green economy.
Under outgoing President Donald Trump, the United States, the IMF’s largest shareholder, has blocked such a new SDR allocation, a move akin to a central bank printing money, since it would provide more resources to richer countries since the allocation would be proportionate to their shareholding.
Swedish Finance Minister Magdalena Andersson, the new chair of the IMF’s steering committee speaking at an online news conference with Georgieva, said it was clear the need for liquidity remained great, and she would consult with member countries on options for expanding liquidity.
Andersson, the first European to head the International Monetary and Financial Committee in more than 12 years and the first women, started her three-year term in the role on Monday.
Georgieva said the IMF had rapidly increased concessional financing to emerging market and developing economies, including through donations by member countries of some $20 billion in existing SDRs. That would continue to play an important role, but further steps were needed, she said.
“It will continue to be so important, even more important, for us to be able to expand our capacity to support countries that have fallen behind,” Georgieva said.
She said a new SDR allocation had never been taken off the table by IMF members, she said, adding that some members continued to discuss it as a possible move. A possible sale of gold from the IMF’s reserves would have “some opportunity costs” for the IMF, but would be up to members, she said.
She said she expected the Group of 20 major economies to extend the current moratorium in official debt service payments by the poorest countries, now slated to end in June, but much would depend on the pace of vaccinations in coming months.