ET Now|Last Updated: Jan 28, 2020, 03.34 PM IST|Original: Jan 28, 2020, 03.34 PM ISTOverall economic impact of the coronavirus on crude oil?
All of a sudden, it is being quite acutely felt across the commodity markets. The general feeling is that if people remain indoors, they are not going to spend money and that will lead to the economy starting to slow. It is a little bit more of a reaction which is seen at the moment and it is a reaction because we had a market that was relatively long leading into 2020. If anything, there are hiccups and base metal and oil prices have come under a lot of pressure.
Is crude in for an extended period of decline?
Absolutely. The market is having a bit of a respite due to the geopolitical concerns, the Middle Eastern issues we have had with Iran and Iraq, these issues are still flying around, they are still in the press but they are not taking centrestage. I guess more decisions will be taken by OPEC which will lead to prices starting to firm but at the moment, the coronavirus and the inability of the economies to take a grip on themselves, are being felt now.
In the near term, how deep would crude prices fall?When I look at the Brent contract, I see a lot of support around $57.50-58 level. It is going to need some pretty heavy news to see a breakthrough at that level. I would expect it to hold. It is a very good relief for India to see prices under pressure like this as that will certainly help the economy.
Crude oil will remain in a range and in the near term, that would just test the lower end of the range which is around $57.50.
Are metals under pressure too?
Absolutely. Leading into this year, the outlook was relatively possible on a lot of the commodities, particularly in copper, zinc and nickel. But we have seen a spin and as a result, all these markets have come under significant pressure just over last week worth of trading.
The equity markets just might take a bit of the spill, but base metal markets are under pressure. Long markets have been spooked by the concerns we have on global growth.
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