PETALING JAYA: The global oil market continues to reel from the slowing economic activity caused by the coronavirus (Covid-19) outbreak.
Over the last five days, the Brent crude oil fell almost 6% to US$56 a barrel.
Investors were wary about the prolonged situation that could be a drag on economic growth.
According to the latest forecast from the International Energy Agency (IEA), the demand for crude oil is expected to decline due to an economic slowdown in China due to Covid-19.
The agency has slashed its oil demand growth for 2020 by 365,000 barrels a day, a 30% reduction to its previous forecast made last month.
The IEA warned that this year would be the first time in a decade that the global oil demand would contract.
In 2019, China accounted for more than three-quarters of global oil demand growth.
Although the oil markets have rebounded last week as investors grew confident that the outbreak was stabilising, the situation was shortlived as the number of Covid-19 cases outside China increased.
“While the SARS epidemic of 2003 is widely used as a reference point for analysis of Covid-19, China has changed enormously since then. Today, it is central to global supply chains and there has been an enormous increase in travel to and from the country, thus heightening the risk of the virus spreading, ” IEA said in a recent report.
Several countries, including Singapore, have announced a stimulus package aimed at at mitigating the impact the virus.
Meanwhile, the Malaysian government is targeting to announce its stimulus package tomorrow.
Meanwhile, gold prices soared to a seven-year high: a clear indication that investors are looking for safe-haven assets.
Spot gold surged close to US$1,700 per ounce before it settled at US$1,650 yesterday.
Other assets such as the US dollar and Japanese yen continued to strengthen.
It is worth noting that Brent crude oil has declined as much as 21% from its peak on January 6 at US$68 per barrel to as low as US$53 per barrel on Feb 10.
Last week, Goldman Sachs had slashed its crude oil forecast by US$10 to US$53 per barrel for this year. It warned of the risk of Brent going into the US$40-level or even lower in a market capitulation.
All eyes are on Petroliam Nasional Bhd (Petronas) result announcement today as well as its plan for 2020.
Petronas would allocate about RM45bil to RM55bil for its capital expenditure every year with upstream activities having the lion shares of that.
Shares in the local oil and gas services providers listed on Bursa Malaysia providers have been on the downward trend over the last two weeks.
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