There's a 'bear stampede' in the oil market as a new coronavirus spreads, but that may not be directly comparable to the sell off in 2003 associated with the outbreak of SARS, according to Vandana Hari, founder and CEO of Vanda Insights.
The novel coronavirus also appears to be less severe, she said, noting that the virus has not spread the way SARS did outside of China.While Hari called the fall in oil prices "premature" and "overdone," she also said there were "bearish leanings" in the market before the outbreak began. That includes the dying down of U.S.-Iran tensions and a mild winter, she said.
"Perhaps a bigger one is that the China-U.S. trade deal ... has not really raised hopes for commodities seeing a major comeback in demand," she added. "All of these factors will remain and I presume they have contributed to this fear and panic being a little bit more amplified." She said she doesn't see upside catalysts for oil "at all," but OPEC and its allies could "put a floor" under prices.
"I do believe they will do everything in their power, but with a caveat again, that we'll have to see ... the downslide that we've seen in prices over the past week become quite entrenched," according to Hari. "It's well known that $60 for Brent is a kind of psychological floor that they would like to defend," she added. "I do believe they will step in, but I think it's again quite premature for them ... to pronounce that they will."Related Tags
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