Oil futures fell 3% in morning trading on fear that travel will be restricted by the swine flu outbreak.
The World Health Organization has said that the virus is spreading past the initial travelers returning from Mexico. The U.S. has confirmed that there are 64 cases of swine flu here in the States, up from 40 yesterday.
And there are now 11 confirmed cases in New Zealand from the 22 students who recently returned from Mexico.
This has confirmed that the disease is passing from person to person, and in response the WHO has raised its global alert to Phase 4. Phase 6 is a pandemic.
Bloomberg interviewed Charles Kernot, a commodities analyst at London-based Evolution Securities Ltd. who said, “It’s a worry about the global economy and demand. If it’s affected by the swine flu, stocks will build up and prices will fall. People are hedging their positions a bit, just in case it turns into a pandemic.”
Commodities have climbed 8.2% since March. This would be a big setback particularly for oil prices, which have fallen 3.2% today.
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Countries are starting to restrict travel, and are advising people not to go to Mexico and the United States. Japan is suspending visa-free entry for Mexican nationals. Singapore and South Korea were screening air passengers yesterday. The European Union’s health commissioner has told travelers to avoid outbreak areas.
MarketWatch reports, “Pandemics affect the economy in a variety of ways. Tourism and related industries are usually the first to feel the impact, economists say. Trade flows can see additional damage as governments slap trade restrictions on certain products, whether tied to the outbreak or not. Discretionary spending also takes a hit.”
And that’s why oil prices, pork bellies and airlines have been awash in red these past two days.
But Crisis Trader editor Christian DeHaemer thinks this is a great chance to get in on oil…
He says, “I’ve been beating the market for more than 10 years because investing is easy. You buy quality assets when no one else wants them. You sell when the CNBC yahoos start jumping up and down screaming that they are a buy – simple.”
“That’s why I love the swine flu,” Chris says. “The media’s concerted attempt to frighten hausfraus into watching CNN has dropped the price of oil about 5%, into the high $40s. This provides you with another chance to buy the dips.”
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