Oil prices plunged about 7% last week and 12% so far in January, primarily dented by psychological factors led by the rising number of cases of the new Corona Virus in China and city lockdowns that deepened concerns about demand and also risk-off sentiment in the market.

There is no doubt that January 2020 turns out to be roller-coaster month for most of the asset classes and the same is the case for oil prices that initially spiked due to Iran-US tensions and of late coronavirus came as denting factor.

Prices touched a monthly high of $65.65 a barrel on 08th January 2020 and since the caught in the bears grip on account of first, no supply halt resulted by Iran-US tussle and second, spreading Coronavirus that will probably dive the demand of oil if situation continues to worsen as there will be less traveling to China, the word’s second-largest consumer of oil after the U.S.

The IEA also forecasted in its latest monthly update that oil market would remain in surplus in the first half of 2020, adding further bearishness in the prices.

The Coronavirus has been identified in Japan, South Korea, Taiwan, Thailand, Vietnam, Singapore, Nepal, France, Australia, and the U.S. and has so far infected 2,116 people and killed 56, the majority of whom are in Wuhan, China.

The actual impact of the virus on fuel demand is still uncertain and may be meager at this point but pessimism is taking the toll on the sentiment of the market, resulting in a steep drop last week.

The headlines are sounding very pessimistic but history has shown that a subsequent market recovery from such events is V-shaped and sudden. Whenever the situation will start improving, recovery will be sharper for sure.

Support for WTI oil lies at $50 and then $40-$45. Either prices will halt corrective wave near $50 or near $45-$40.