Demand destruction in China is the story
Empty Chinese highways and grounded planes are the story in the crude oil market at the moment.
The shutdown of large parts of China's economy is weighing heavily on oil. WTI is trading at $51.78 compared to $63 three weeks ago.
The big uncertainty is how long the shutdowns in China will last. In the meantime though, oil will go into storage and push inventories higher. Even when demand returns, that oil will need to be used before global stockpiles begin to fall again. OPEC is already talking about an earlier meeting but all the weight will fall on Saudi Arabia because other members have been reluctant to cut.
On the chart, the mid-October low is the next level to watch if yesterday's low of $51.66 breaks. The bigger level is last year's triple bottom near $50.72.
If coronavirus lasts and expands, a break of $50 is a foregone conclusion. The risk then is it exposes some heavily-indebted oil companies, particularly struggling shale players.
