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Oil is falling on coronavirus fears

Last week we saw the move to a risk off market on the fears that the Chinese coronavirus is becoming an unmanageable global pandemic. These fears have continued this week. One of the casualties of these fears is the commodity oil. It fell sharply again last week. Why? Well, when the market is in a risk off mood it is fearing that the global economy is going to shrink.

Less growth means less machinery movement for transportation and construction. This in turn means there is less demand for oil, so oil prices fall. In the coronavirus instance people will also travel less by airlines, shut down countries have people not travelling in their cars etc. Remember, in the current market conditions oil is heavily oversupplied, so there is already an oversupply which is keeping oil prices pressured. So we can expect sellers on oil retracements to continue during the coronavirus crisis.

Risks to this outlook

Any news that indicates the COVID-19 virus can be medically contained will negate this outlook.