Crude Oil Price War, Coronavirus Fears Put 4-Year Low in Focus

Crude oil prices steadied in Asia Pacific trade on Wednesday having fallen to four-year lows in the previous session as investors continued to fret the effects of coronavirus on economic performance and, therefore, demand for energy.

A fall in US stockpiles reported by the American Petroleum Institute on Tuesday may have provided some support to the market but between coronavirus and the price war between major producers Russia and Saudi Arabia, traders were otherwise preoccupied. Official inventory levels from the Department of Energy are due later.

Overall risk appetite remains extremely weak, with local stock market fortunes mixed despite the boost given to Wall Street by proposed massive fiscal support for the US economy which could include simply handing over cash to millions of Americans. This proposed experiment in so called ‘helicopter money’ would be the largest example of the practise yet seen.

This month’s effective freefall has seen crude prices return to lows not previously seen since late 2003. They’re now in some danger of erasing the entire rise from the lows of December 2002 when prices were just a little below $18/barrel. It seems unlikely that any modern-day producer could long tolerate those levels, but they’ll remain in play unless we see some broad near-term recovery in risk appetite.