European Stock Drop Fueled By Failing Oil Prices and Virus
The Organization of Petroleum Exporting Countries (OPEC) recently held an unsuccessful meeting with its allies. Which resulted in a row in Vienna between Russia and the cartel. The disagreement threatened a diplomatic alliance from two groups with a global influence on oil prices and caused oil prices to drop by 30%.
Meanwhile, global investors are bracing themselves for the global spread of the COVID-19 and OPEC’s failed talks. In Europe, oil and gas stocks fell by 14.7%. Leading in losses and causing all other sectors to decline as well.
Now, European stocks have fallen by 8.2%. The market is looking at a bearish trend. While around the world, stocks continue to fall due to oil price drop and fear of the coronavirus.
Russia and OPEC’s Disagreements Might Cause Historic Catastrophe
Reportedly, OPEC had been leaning on Russia for a while to perform a dramatic cut on its production. This is to compensate for the lower demand due to the coronavirus effect on China and its economy.
After refusing to get on board with OPEC’s strategy, Moscow got a response for OPEC. OPEC stated that it will remove limits on crude production by the cartel. Such a decision would flood the already saturated market in a time when demand is down and expected to fall even further.
According to Bjoernar Tonhaugen, the head of oil marketers at Rystand Energy:
“This is an unexpected development that falls far beyond our worst-case scenario and, in our view, will create one of the most severe oil price crisis in history. The decision risks sent oil prices into a free fall. With the fundamental floor for prices as in 2016, determined by the cost of completing US shale DUCs, which is now as low as $25 per barrel.”
Speaking on Friday after OPEC’s response, the Kremlin stated that Moscow has no plans to talk to OPEC’s leaders in Saudi Arabia. Further diminishing any chances of a deal being struck soon.
Coronavirus, the Root of the Oil Prices Crisis, is Expected To Spread Globally
The fear of widespread coronavirus is causing chaos for central banks around the world, while more companies and SME’s continue to close down due to fear. The latest statistics by Johns Hopkins University indicate that more than 100000 people in the world have been infected by the coronavirus.
Most of the 3400 people who have died from the virus are from mainland China. This is the biggest importer of oil in the world. The authorities in China have put sharp measures in place. In order to prevent the spread of coronavirus, including shutting down factories and citizens and quarantining infected citizens.
In Europe, Germany recently recorded more than 100 confirmed cases, which brought the total number to 800.
Italy, the coronavirus hot spot in Europe, has confirmed more than 7000 confirmed cases. More than 90% of all stocks in Italy stayed closed on Monday. While the Italian blue index chip crushed by around 11.5% today.
As the world braces for a widespread coronavirus outbreak, the UK government had an emergency meeting on the 7th of March to table additional measures to stop the spread of the virus.
Get the latest economy news, trading news, and Forex news on Finance Brokerage. Check out our comprehensive trading education and list of best Forex brokers list here. Subscribe now and receive FREE updates on the market today!