By Arab News
By Faisal Faeq*
News that US President Donald Trump was infected with the COVID-19 coronavirus came as a thunderbolt to both financial and oil markets alike.
The impact on the oil price was immediate, with both the Brent and WTI benchmarks falling below $40 per barrel last week.
But why all the investor fuss? When the leaders of both the UK and Brazil were struck down with the virus, markets didn’t even blink.
Was it because Trump leads the world’s largest economy and last remaining superpower?
Or were investors worried about the fate of a planned $ 2.2 trillion stimulus package for the economic recovery plan, which Congress has so far failed to pass?
As the president’s health was reported to have improved, so did oil and financial market indicators.
Crude oil is one of the most sensitive commodities to geopolitics and the economy. The reaction of global oil markets to Trump’s coronavirus infection may have been more about the pace of the recovery in oil demand than about the consequences of a possible political chaos.
Trump has always been supportive of the stock market and this support has manifested itself in corporate tax cuts and the recent shift in monetary policy to ensure US stocks remain attractive to investors.
Trump has also been a stalwart supporter of the US oil industry and it is no coincidence that US oil production reached an all-time high of near 13 million bpd at the end of 2019 under his watch — even if it has since succumbed to the inevitable forces of gravity that have sapped global demand.
Trump has pushed for the extension of federal aid to oil and gas companies that have been affected by the historic plunge in prices, with help in the form of low-interest government loans to shale oil companies.
After OPEC+ agreed the largest output cuts in history, Trump praised Saudi Arabia and other major OPEC+ producers for their efforts in restoring balance to global oil markets.
A speedy recovery by the president is likely to help the oil market return to where it was before news of his condition broke, with oil trading in a narrow range of low $40s.
The behavior of markets in recent days shows there is still truth in the notion that when America sneezes, the world does indeed catch a cold.
• Faisal Faeq is an energy and oil marketing adviser. He was formerly with OPEC and Saudi Aramco. Twitter:@faisalfaeq