Fears of global recession have mounted after the price of oil suffered its worst one-day fall in 29 years as Saudi Arabia and Russia traded blows in a supply war.
audi Arabia's move to cut the price of a barrel of crude oil followed falling demand for oil as the coronavirus hits travel plans all over the world.
The FTSE 100 of the UK's most important companies reacted to the oil price drop with its steepest one-day fall since the worst of the economic crisis of 2008.
And while the fall in price of oil could find its way to a fall in prices for consumers, it's unlikely to cushion the economy in Northern Ireland from the impact of coronavirus. Economist Neil Gibson warned it could put firms in some sectors out of business.
The FTSE 100 lost 7.7% of its value in yesterday’s markets bloodbath, losing 496.78 points to end the day at 5,965.77.
The price of international oil standard Brent crude was around 25% down at the end of trading in London, at $36.20 per barrel. It had rebounded from earlier 35% lows.
The FTSE’s European cousins, the Paris-based Cac and Germany’s Dax, fell 7.9% and 7.4% respectively.
On the other side of the Atlantic, the Dow Jones fell 6.2% and the S&P 500 fell by 5.9%.
Among the biggest fallers on the FTSE 100 were BP, down 77p to 318.20p, and Royal Dutch Shell B, down 290.8p to 1,304.80p.
Energy markets commentator Jamie Delargy said the fall in the price of oil was likely to lead to cheaper home heating oil.
“It’s too early to say what households will end up paying but in early 2016 when crude oil was last trading at these current prices, 500 litres of home heating oil cost in and around £145,” he explained.
“If home heating oil returns to that level, I estimate it will be cheaper than natural gas even after the latest price cuts in gas have come into effect.”
Seamus Leheny, policy manager for the Freight Transport Association, said he hoped the fall in the price of oil would bring benefits to his members.
“The fall of around 30% will certainly help the logistics industry but this saving may take a while to filter down to the price at the pumps and in particular for goods vehicle operators, the cost of their bulk fuel prices,” he said.
But despite the short-term benefits of the oil price drop, fears of a recession were paramount.
News of a month-long lockdown in Italy was met with shock by analysts, who said the measures affecting 16 million people went beyond the predicted disruptions. Morgan Stanley and Berenberg both stated that they expect the eurozone’s economy to shrink in the first half of 2020.
And Neil Gibson of EY said it was far from clear how long the economic damage from coronavirus might last. The effects have been felt here for a few weeks, with shipments of goods like sofas and curtains held up in China as a result of factory closures.
Mr Gibson said some firms might bounce back but others would not.
“For some businesses, production can be delayed and ramped back up when required, so perhaps Covid-19 is only disruptive for a quarter, but for many the damage could be much longer lasting,” he said.
“Sadly, a number of firms running on tight margins and in vulnerable sectors may not survive at all. The tourist and entertainment industries, for example, cannot easily catch up a lost season.
“All trading sectors may see some residual effects throughout 2020, even if the outbreak dissipates before the summer, as supply chains will be disrupted and backlogs will need to be prioritised.”
He predicted that the impact of the virus could mean growth in Northern Ireland of 0.5% during 2020, instead of the predicted 0.8%, adding: “Recessionary conditions will certainly be experienced in particular sectors and, regrettably, there will be a number of local firms that may cease to trade as a result of the outbreak.”
He said the consequences of the outbreak could mean greater moves in future to have a diverse supply chain. And he said it highlighted the importance of services firms whose cleaning work on company premises could be helping contain the spread of the virus.
“Health and hygiene crises are a reminder of the value of an often overlooked part of almost every business — the cleaners and the catering staff.
“Think of how much a day or week’s disruption would be and the value of these critical workers becomes clear.”
Companies and public sector organisations in Northern Ireland are also reacting to the cancellation of international conferences.
Belfast City Council said it had lined up a delegation of seven bands, 15 companies and one staff member to attend the South by Southwest media festival in Austin, Texas, this month, which has been cancelled.
However, Catalyst NI confirmed it had gone ahead with a trip this week to the US for a team of entrepreneurs. A spokesman said: “Catalyst continues to follow government guidance on coronavirus in relation to all of our activities. At present there is no government advice not to travel to the US.”