Coronavirus: OPEC-Russia consider emergency meeting to cut supply in response to anemic Chinese demand
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Crude oil prices continued to fall Monday, following news that the coronavirus outbreak continues to spread and China’s economy continues to falter. An influential news report from Bloomberg suggested Chinese oil demand is plunging.
“One of the things that hit the market this morning was the report that Chinese demand may be down as much as three million barrels of oil per day,” Ellen Wald, energy analyst and president of Transversal Consulting, said.
If true, that would compromise a huge and sudden dropoff in Chinese oil demand. As crude prices fell — to their lowest levels in a year — word came that the oil supply organization known as OPEC Plus would hold an emergency meeting as early as next week and cut supply by as much one million barrels per day. The OPEC Plus group includes Saudi Arabia and Russia, two of the world’s largest oil producers.
“Normally you would hear news of a million barrel per day cut and oil prices would go up,” Wald said.
But prices continued down. Nervous traders are selling oil contracts first and asking questions later, said Mikkal Herberg, energy research director at the National Bureau of Asian Research.
“Chinese oil demand statistics are a little fuzzy,” Herberg said, “much more opaque than, say, the U.S. market or the European. Where this virus is evolving so quickly, we’re all, in a lot of ways, in the dark.”
When the official data do come out, markets may calm down a bit, yet even then there will be a big question on traders’ minds: how long the Chinese slowdown will last.
“I think it’s that part which is right now fraying the most nerves on the market,” Roger Diwan, energy analyst and vice president of IHS Markit, said. “We don’t know if it’s another week, or another four weeks or six weeks.”
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