Currently the environment of the global market is in such a state where majority of everyday traders are fired, moved on or retired within duration of a decade or less. The response that such type of events get tends to be overdone as it hasn’t been seen in that timescale. For the experienced traders this is more suitable. These traders do not retire and trading is done for hedge funds or on their own account. They do this to allow the new traders that have less-experience distort the prices before they step in and from corrections based on reality scoop up large profits. Whereas, according to a realistic research on the current coronavirus (2019-nCoV) outbreak’s actual figures involved, which was started in Wuhan region of economy which is states that the actual effect caused on Chinese economy which is the key bulwark of support for the oil price, is expected to be minimal. Whereas, there are many reasons for shortage of oil and corona virus is not one of them.
Putting the excitement of the inexperience aside, it surely is true that though the coronavirus started around central Wuhan, it has spread far beyond its initial outbreak radius. The outbreak includes over 20 countries where the cases are being reported now. It is also true that at this time of this flu-like virus has caused around a mortality rate of around 2 percent that is 900 deaths out of about 41,000 reported cases. Asia itself have faced problems that were worse than this, for example the 1997 outbreak of H5N1 Bird Flu caused a mortality rate of 52.8 percent i.e. in 18 countries 455 deaths from 861 cases, the 2013 H7N9 Bird Flu outbreak caused a mortality rate of 39.3 percent, 616 deaths out of 1,568 cases, and according to the U.S.’s Centers for Disease Control and Prevention (CDC) the 2009 H1N1 flu outbreak that began in Asia as well, resulted in around 12,469 deaths from 274,304 hospitalization cases in the U.S. alone. According to a CDC report released in 2012, the total number of deaths was at least 284,500 from the 2009 H1N1. Looking at the current scenario, for those in the U.S., the mortality rate from the coronavirus is much less than the regular flu-like illnesses and related pneumonia. It is approximately three times less at around 2.33 percent. Even the ‘smaller’ virus outbreaks in Asia or the Middle East have caused much more violent effects and have been more deadly than the current coronavirus. This includes the 1998 Nipah virus (513 cases, 398 deaths, 77.6 percent mortality rate), 2002 SARS (8,096 cases, 774 deaths, 9.6 percent mortality rate) and 2012 MERS (2,494 cases, 858 deaths, 34.4 percent mortality rate).
So in conclusion the effect on economy of China which is the key global demand element in the global oil pricing matrix will not be as much as it seems to be. In the first week of February 2020 Rory Green, Asia analyst for TS Lombard, in London, told OilPrice.com that it is expected for China’s Q1 year-on-year GDP growth to be affected by just a one-off one and a half percentage point shock. This makes it necessary to push Q1’s projections on Q2 for this year.