Oil Prices Surge Amid Reports of Coronavirus Drug

• Oil Prices Surge Amid Reports of Coronavirus Drug

Global oil prices surged by almost 4 percent on Wednesday following media reports that scientists have developed drugs for coronavirus.

Brent crude oil, against which Nigerian oil is measured, rose by 4 percent or $2.1 to $56.09 a barrel, while the US West Texas Intermediate (WTI) crude gained $1.94 or 3.9 percent to $51.55 per barrel.

Oil prices surged despite World Health Organisation (WHO) playing down media reports, saying there were no known effective drug for the virus at the moment.

This, was largely due to another report that the Organisation of the Petroleum Exporting Countries (OPEC) and its allies were considering cutting additional output to further squeeze on global oil demand.

Oil experts have said the coronavirus outbreak would weigh on China’s growth in 2020 and hurt global oil demand as China remains the world’s largest importer of the commodity.

“Based on our forecast that China’s GDP growth will slow to just by three per cent year-over-year in Q1 2020 and assuming that the virus is brought under control relatively quickly, we have tentatively pencilled in a 10 per cent drop in the country’s oil consumption in Q1,” Capital Economics analysts said in a note Wednesday. “This pushes the global market into a small surplus in the first half of 2020.”

Harry Tchilinguirian, a BNP Paribas analyst, said Chinese economy will struggle for awhile given restrictions and possible social distance.

“The (Chinese) economy will be weakened for some time to come as quarantines, social distancing and travel restrictions remain in place,” BNP Paribas analyst, Harry Tchilinguirian, told the Reuters Global Oil Forum.

“But as financial markets are anticipatory, one can see how favourable news in relation to potential medical solutions, or indications that we have reached a turning point in the progress of the virus outbreak, are likely to be interpreted positively.”