Oil prices waver as Opec mulls further production cuts to offset coronavirus impact
Oil prices were largely steady today despite growing economic disruption from the coronavirus outbreak amid rumours that producer cartel Opec is considering even deeper cuts to oil output.
Brent crude fell 0.2 per cent to $56.49, whilst West Texas Intermediate showed a small gain of 0.4 per cent to reach $51.74.
Last week prices fell since August, with Brent crude showing losses of more than $10 since the beginning of 2020.
Prices have been hammered by the fallout from the spread of the coronavirus, which has hit demand from China, the world’s largest importer of oil, very hard.
According to some reports, Chinese demand has fallen by 3m barrels a day, or about 20 per cent of its total consumption.
Iranian oil minister Bijan Zanganeh today called for a co-ordinated effort to stabilise prices, saying that efforts “must be made to balance” the market, which is currently running a considerable surplus.
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He also said that Iran would agree to bringing forward Opec’s next meeting to February to address the crisis, as it widely expected.
Opec and its allies, including Russia, will begin a technical meeting tomorrow to discuss potential cuts of up to 500,000 extra barrel per day.
At its biannual meeting in Vienna in December, the cartel agreed to increase production cuts by 500,000 barrels a day, taking the total supply curb to 1.7m barrels.
Neil Wilson, chief markets analyst at markets.com, said that how much damage the coronavirus could do to the market is yet to be fully known:
“The biggest risk is that we see a major amount of demand destruction in China, something that oil markets have never really had to contend with before.
“The longer this lasts the more there is material disruption to demand growth this year, which will force a longer-term rerating towards the lower end of forecasts.
“Getting a good handle on what the economic impact will be is very hard – we will need to see how quickly airlines restart flights in and out of China, for example, and keep a close eye on when workers are able to return to factories.”