WTI gaps to the downside in Asia's open, coronavirus fear gripping markets

• WTI falls to a session low in a bearish opening gap of $51.70.
• Coronavirus weighing on risk appetite at the start of the week. 

The price of oil has been dominated by the risk-off themes circulation global financial and commodity markets while the US dollar has been on the rampage for the bet part of this year so far. At the time of writing, West Texas Intermediate crude is trading at $52.09 having fallen from a high of $52.59 to a session low in a bearish gap of $51.70.

The coronavirus is doing the rounds again at the start of this week as the number of cases world-wide, as well as deaths, are increasing. We have seen an increase for mainland China since the 17th Jan move from 41 cases to Feb 1st 14,380 and a death toll of 304, while the latest numbers shown for 21st Feb, 76,288 and 2,345 deaths. However, there are now cases in various countries and the world. More on that here: Italy's confirmed cases surged from three on Friday morning to more than 130 by Sunday

• What you need to know for the open: Coronavirus risk-off themes rule the waves

Coronavirus could be the straw that broke the camel's back

Some of the world's biggest economies are already on the brink of recession and a number of smaller economies that are hurting, too. However, there is not widespread panic in the markets, yet, although the risk-off theme is dominant. Markets are looking to world authorities to preempt the economic impacts and act accordingly, pumping enough stimulus around to prevent a global recession.

However, the Federal Reserve, European Central Bank and other central banks may have fewer monetary tools to deploy and are counting on increased fiscal stimulus from governments – this is where markets could be wrong. Markets are wagering that the combination of fiscal and monetary measures will again prevent the worst, but if this has been a grave miscalculation, then we are likely to see a catastrophic impact on energy prices among a fall-out in global financial and commodity markets. Remember, we are in the tenth year of a seven-year cycle while facing slowing growth, (just look at Japan's and China's expected GDP) growing debt and rising geopolitical uncertainty – the coronavirus could be the straw that broke the camel's back. 

"Before energy markets can make a sustainable move higher, an OPEC+ response is going to be needed at the March meeting, and thus far Russia is seemingly reluctant to participate in further curtailments," analysts at TD Securities explained. "On the CTA front, we do not expect any material moves, while gasoline is trading in whipsaw territory, which could see buying above $1.635/gal."

WTI levels