Oil price falls as virus fears hit hard
The price of oil fell sharply but global stock markets were mixed as investors scrambled to assess the potential fallout to world trade and tourism should the cases of coronavirus increase over the weekend.
Authorities have all but shut down China’s Wuhan, a city of 11 million and a major transport hub, at what is normally the busiest time of year — the Lunar New Year holiday — when millions of people travel home to visit their families.
Millions of people in surrounding cities are virtually stranded after public transport networks were shut to stop the spread of the virus, believed to have originated at a Wuhan market illegally selling wildlife.
On one high-speed train carrying a journalist that stopped in Wuhan station today, about 10 passengers got off and nobody got on before the train resumed its journey to Changsha.
Although it stopped there, Wuhan had been removed from the train’s schedule. Wuhan’s airport is not closed, but nearly all flights have been cancelled. Three international flights arriving yesterday would leave with no passengers, an airport official said.
The virtual lockdown hints at the potential fallout to tourism and world trade, which depends on Chinese factories feeding global supply chains for everything from smartphones to car parts.
Economists were brushing down charts and economic data from the Sars virus 17 years ago. “With the Chinese Lunar New Year celebrations likely to be muted by the government measures, there is a hope that the potential widespread proliferation of the virus will be averted,” said Joshua Mahony at online broker IG.
Nonetheless, the price of Brent crude oil slid $1.40 to $60.64 a barrel on fears that the virus could hit tourism and weigh on GDP expansion in China, Japan, and beyond.
Analysts said the effect on travel bans on Chinese tourists could reduce GDP growth in Hong Kong, Cambodia, Thailand, and Singapore, as well as in Japan because of the numbers and spending power of Chinese visitors. And Capital Economics said the new coronavirus could hit commodity prices hard.
“We don’t pretend to be experts on public health issues. However, experiences of previous epidemics, such as the outbreak of Sars in February 2003, may offer a rough guide on what to expect going forward,” the economists said.
“Back then, the Goldman Sachs Commodity Price index initially shed more than a tenth of its value, but this loss was fully recovered a few months after the disease was brought under control in July 2003.”
