OPEC and its key ally in the OPEC+ coalition, Russia, are set to convene an extraordinary meeting of a joint technical committee on Tuesday or Wednesday this week, to discuss the continued decline in oil prices since the coronavirus outbreak in China, a source close to OPEC told AFP on Sunday.
The OPEC+ group of producers are said to be considering deepening the cuts by another 500,000 bpd, due to depressed oil demand amid the virus outbreak, OPEC and industry sources told Reuters on Monday.
There’s also growing speculation that OPEC may move up the meeting scheduled for March 5-6 to February.
OPEC and its allies are now considering moving the meeting to February 14 and 15, three weeks earlier than initially planned, an OPEC source told Reuters today.
Since the start of the virus outbreak last month, more than 360 people have died in mainland China so far, while oil prices have dropped by around 15 percent in two weeks.
Early on Monday, oil prices were also depressed, weighed down by continued fears that the travel restrictions and the slowdown in China’s economy will have taken a toll on oil demand not only in China, but also in wider Asia. Related: Oil Bankruptcies Are Reaching Worrying Levels
Despite last week’s assurances from OPEC’s leader and largest producer, Saudi Arabia, that OPEC+ has “the capability and flexibility needed to respond to any developments,” and despite the United Arab Emirates (UAE) chiming in to downplay what it called a “market over-reaction,” OPEC is now facing a tough dilemma how to proceed with its price-fixing policies, considering that the market is so bearish on demand that it is totally ignoring a huge loss of supply from Libya.
OPEC is inclined to extend the ongoing production cuts at least through June and could discuss deeper cuts if need be, OPEC sources told Reuters last week, as oil prices continued to slide on fears that the coronavirus outbreak will impact oil demand.
Russia is ready to react and doesn’t see any problem meeting with its OPEC allies earlier than planned, Russian Energy Minister Alexander Novak said on Friday, noting that it’s too early to say how hard the virus is hitting oil demand.
By Tsvetana Paraskova for Oilprice.com
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Therefore, my advice to OPEC+ is to wait until the outbreak is contained to judge the situation in the market.
Any possible decline in the global oil demand is not a result of a weakening global economy but a case of China being in quarantine and therefore closed to business and unable to receive crude oil shipments.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London