OPEC considers production cuts as coronavirus impacts China's oil demand
Photo: Ryad Kramdi/AFP via Getty Images
OPEC's possible responses to the spreading coronavirus that's hurting oil demand and prices are starting to come into view.
Why it matters: Besides killing more than 360 people so far, the outbreak is severely curtailing airline and economic activity in China, the world's largest oil importer and second-largest oil consumer.
- Brent crude prices have tumbled by roughly $10 per barrel in the last two weeks. It's currently trading in the low-$56 range.
Driving the news: Reuters reports that OPEC and allied producers could deepen their existing production-limiting pact by 500,000 barrels per day.
- The Wall Street Journal has the same info, but also reports: "Another option being considered would involve a temporary cut of 1 million barrels a day by the Saudis to jolt oil markets."
The big picture: This new Bloomberg piece, citing people with "inside knowledge" of China's energy sector, gets to the scary and immense scale of what's happening...
- "Chinese oil demand has dropped by about three million barrels a day, or 20% of total consumption, as the coronavirus squeezes the economy."
- It's "probably the largest demand shock the oil market has suffered since the global financial crisis of 2008 to 2009," they report.
What's next: A technical monitoring committee for OPEC+, which is the alliance between the cartel, Russia and allied producers, is slated to meet this week, per multiple reports.
- A higher level emergency meeting could occur later this month, several outlets report.