By Barani Krishnan
Investing.com – Oil fell an epic 15% or more on the week, the biggest weekly drop since 2008 that pushed crude prices to under $50 a barrel, as fears over the coronavirus crisis ravaged markets from stocks to even safe-havens like gold, leaving investors few places to hide.
West Texas Intermediate, the U.S. crude benchmark, settled down $2.33, or 5%, at $44.76 per barrel, the lowest since December 2018. On a weekly basis, WTI lost 16%, its most in a week since mid-December 2008 — stirring memories of the Great Recession.
Brent, the London-traded global benchmark for crude, settled down 2.51, or 4.8%, at $49.67 per barrel, breaking the key $50 support. Brent’s session low of $48.95 was a bottom going back to July 2017. For the week, Brent was down 15%.
Crude prices plunged as stocks on Wall Street succumbed to a free-fall. The S&P 500 was down 13% on the week, heading for its worst weekly slump since October 2008. In precious metals, gold tumbled 3.5% after higher margin calls imposed on gold traders and selling by hedge funds to cover losses elsewhere.
The World Health Organization said on Friday it had raised its worldwide risk assessment on the coronavirus to “very high” from high. Previously, only China, where the outbreak started, had been designated the very high-risk assessment.
Analysts say the main reason for the panic selling across markets was uncertainty on how much worse the pandemic could get and how much longer it could last, with the global death toll already at above 2,800 amid 83,000-odd infections. But some, including President Donald Trump, think the virus may just “go away” as the warmth of the spring and summer months beckon.
“Even if the coronavirus disappears as we warm up, as the supply chain for everything is ‘freezing up’ and may slow down manufacturing while the credit markets are also having the same issues as banks are not lending according to many,” said Scott Shelton, energy futures broker at ICAP in Durham, N.C.
“You can’t have global growth without those two working relatively well,” Shelton added.
Moody’s Analytics said the Federal Reserve may have to restart an easing cycle it ended in December if there were signs that the U.S. economy, which was into a record 11th year of growth, was under serious threat from the coronavirus. Speculation is rife that the central bank may announce a rate cut of between a quarter and half point at its March policy meeting.
Yet, given the uncertainty spawned by the pandemic, “Fed rate cuts may fall short of stabilizing markets,” the research unit of Moody’s said.
It said it expected the U.S. economy to grow by an annualized rate of 1.3% in the first quarter, down by 0.6% point because of the coronavirus. Growth for all of 2020 was seen at 1.7%, down 0.2% point.
Crude traders now await to see if the OPEC+ alliance of oil producers — led by Saudi Arabia and Russia — could agree by next week to cut more than one million barrels per day from global production to stop the market’s bleeding.
Oil Back Under $50 in Worst Week Since the Great Recession