Saudi Arabia is pushing for deeper emergency production cuts of up to 1 million barrels per day (bpd) as a technical panel of the OPEC+ coalition is meeting in Vienna on Wednesday for a second day of discussions on how to react to the oil price slide and the coronavirus impact on oil demand.
The technical panel meeting this week can only make recommendations to the full ministerial meeting, but if the Joint Technical Committee of the OPEC+ group of producers finds that an emergency ministerial meeting is needed, OPEC and its Russia-led allies could end up holding a meeting earlier than March 5-6, as currently planned.
Saudi Arabia is signaling that it would be looking for additional cuts of at least 500,000 bpd and up to 1 million bpd to address the slumping oil demand in China, the world’s top oil importer and biggest oil demand growth driver, OPEC+ delegates told Bloomberg.
Russia, for its part, continues to play it cool and insists in public statements that it is ready to move up the meeting, but that thorough analysis of the market would be necessary to see if there is need of further cuts.
Analysts scramble to quantify the demand loss from the virus outbreak, but all, including OPEC, agree that oil demand is currently waning.
The economic slowdown due to the outbreak could cut global consumption by 300,000 bpd to 500,000 bpd for full 2020, which would be around 0.5 percent of global demand, BP’s chief financial officer Brian Gilvary told Reuters on Tuesday. Related: Traders Scramble To Find Oil Buyers Amid Falling Chinese Demand
Wood Mackenzie revised down its annual oil demand growth forecast for China for 2020 by over 200,000 bpd from the previous outlook in early January.
“The Q1 2020 fall in Chinese demand – a 200,000 b/d drop to 13 million b/d - is the first year-on-year decline in the country’s demand since 2009, Ann-Louise Hittle, Vice President, Macro Oils, at Wood Mackenzie, said on Tuesday.
Commenting on OPEC+ emergency discussions, Hittle noted:
“It’s a dilemma for the group because the duration of the hit to oil demand – particularly from China, the world’s largest oil importer - is not clear.”
“Yet, without a further production cut, crude oil prices will remain under pressure and struggle to hold the mid-$50 per barrel price for Brent, let alone recover to above $60 per barrel before Q2 2020,” WoodMac’s Hittle said.
By Tsvetana Paraskova for Oilprice.com
More Top Reads From Oilprice.com:
- Bear Run Sends Oil Down For 10th Straight Session
- Brace For A Global Crisis In 2020
- The Jet Fuel Crack Killing Oil Won’t Last