By Jameel Ahmad
US Crude Oil has fallen to its lowest level since 2003 but more pain could still be on the way
The most recent trading week has essentially been viewed as a disaster for global markets, with material losses experienced across an abundance of financial asset classes.
One of the many victims of suffering has been the British pound, which sank beyond 5 percent in a matter of hours and has weakened beyond 12 percent in just over a week following persistent fears that the United Kingdom will enter a similar lockdown to what has been seen throughout Europe as it battles to prevent the coronavirus outbreak.
However, and for all of the brutality that the British pound has faced on the path to reaching its weakest levels since 1985, the acceleration in selling has paled in comparison to the ruthlessness that investors have shown towards oil.
The commodity dropped 20 percent during Wednesday trade with US Crude Oil falling to its weakest level since 2003 around $20, but more pain can still be on the path ahead for oil prices.
We are all aware that the coronavirus outbreak is unprecedented and something that has not had anything similar to compare it towards since the Spanish Flu of 1918, although it is clear for all to see that the coronavirus is already having a catastrophic impact on the world economy.
Multiple nations remain in the process of announcing further controls and restrictions that are clearly, although put in place for very good reason, creating anxiety for investors and the average person in the street trying to adapt to this environment. I feel that until it is confirmed that a combination between a clear announcement that countries have reached the limit of putting controls in place, or the virus reaching a peak, that it will still be underestimated how much of a negative impact this will have on the world economy.
Truth be told, we are already in a global recession environment but the data hasn’t started to come through yet that will evidence it. We are in a situation where a fast-moving car has been required to slam its breaks in an emergency stop and nobody has any idea when the same car will be able to move again, let alone at the pace that we considered as normal. Even optimists suggest that this anxiety can last for a few months.
For oil prices one must wonder that after falling as low as $20, how much lower can it possibly go? $15 and even less is still possible.
Jameel Ahmad is global head of Currency Strategy & Market Research at FXTM