So why has the oil market reacted strongly in response to coronavirus reports but not in the other direction when rockets are exploding in the Middle East? As oil prices decline, particularly toward such key levels as $60 in Brent and $55 in WTI, so the banks that wrote the puts sell futures to manage their own exposure — a self-reinforcing spiral similar to what appeared to happen in the oil rout that closed out 2018. ADADUnderlying this is the basic problem that has dogged the oil market for five years: excess supply and inventories relative to demand. No one can accurately quantify what impact the coronavirus outbreak will have on oil prices. Oil traders are as much in the dark on the ultimate course of this as anyone.

Source: Washington Post January 26, 2020 12:56 UTC