20% Drop from Peak in One Month Amid New Coronavirus Concerns
[Asia Economy New York=Correspondent Baek Jong-min] International oil prices plunged below $50 during the session, entering a correction phase. Oil-producing countries, which have been contemplating production cuts to defend prices, are facing increasing concerns.
On the 3rd (local time) at the New York Mercantile Exchange, West Texas Intermediate (WTI) crude oil showed continuous weakness shortly after the opening and was traded at $49.92 per barrel around 11:50 a.m., down about 3% from the previous day. Although the decline narrowed afterward, as of 1:40 p.m., it was trading at $50.42 per barrel, down 2.21% from the previous day.
Oil prices have been steadily falling due to concerns over decreased global demand following the emergence of the novel coronavirus and the increasing possibility of sluggish global economic growth. WTI rose to $63 per barrel on January 6 but then experienced a sharp decline, eventually falling to the $50 level on this day. The drop during this period approaches about 20%. CNBC reported that a 20% decline indicates that oil prices have entered a correction phase.
WTI prices on this day were also the lowest in a year. RBC Capital Markets stated, "Although the oil market has faced several supply crises in recent years, it has never experienced a demand-side crisis since 2008," diagnosing that the novel coronavirus is shaking the oil market.
With a demand-side crisis occurring, the market is focusing on decisions by the Organization of the Petroleum Exporting Countries (OPEC). Analysts say that if production cuts are not implemented, further declines in oil prices are inevitable.
The report on OPEC's potential production cuts was the trigger that reversed the oil price, which had fallen into the $40 range, back above $50. On this day, the Wall Street Journal reported that OPEC is considering production cuts of 500,000 to 1 million barrels in relation to the novel coronavirus. CNBC reported that OPEC will discuss the novel coronavirus situation in Vienna, Austria, on the 5th and 6th, and WSJ reported that the decision on production cuts is expected to be made at the OPEC plenary meeting held in Vienna on the 14th and 15th.
WSJ also reported that oil-producing countries are considering reducing daily production by a total of 500,000 barrels until the novel coronavirus situation is resolved, and Saudi Arabia is also pushing for a plan to temporarily cut daily production by as much as 1 million barrels.
However, despite Saudi Arabia's push for production cuts, it is known that it is uncertain whether OPEC and non-OPEC oil-producing countries will join in the cuts.
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