Oil prices fell by more than 1% at the close of the week’s trading, bringing the price of a Brent barrel to $54.45, after Russia announced that it needed more time before committing to additional production cuts, sought by other major producers at a time when the outbreak of the Coronavirus reduces concerns about universal demand.
A source in the oil sector told Daily News Egypt that the outbreak of the Coronavirus, which has spread from China to more than 20 countries, caused a decline in economic and industrial activity worldwide, which reduced the demand for oil in the markets.
He said that the Organisation of Petroleum Exporting Countries (OPEC) and its allies are studying cutting oil production to reduce the supply in the markets, to reduce the rapid decline in the prices in light of the decrease in demand.
President of OPEC Mohamed Arqab announced that the Coronavirus has caused a decline in global oil demand by about 250,000 barrels/day, which created an imbalance in the market.
The source pointed out that oil prices are unstable in light of the region’s political fluctuations, the transmission of the Coronavirus to a number of countries, and the decline in demand for oil in the markets with the precautionary measures taken by countries in various activities such as tourism, industry, and trade exchange.
The Coronavirus continues to spread rapidly in China, and as of noon Thursday, the virus has killed more than 722 people and infected more than 31,000 people so far.
A Russian-led technical committee advising OPEC and its allies, a grouping known as OPEC +, proposed an additional temporary cut of 600,000 barrels per day until OPEC and non-member states meet on March 5th and 6th.
Mohammed Al-Ramahi, Minister of Oil in the Sultanate of Oman, said that his country supports the recommendations of the OPEC + technical committee in order to reach a possible agreement for a short and larger reduction in production as OPEC + immediately cuts oil production until the end of the second quarter, while we continue to monitor the consequences of the Coronavirus on growth oil demand.
The volume of oil production cuts reached 1.2m barrels per day during 2019 and deepened to an average of 1.7m barrels per day in the first quarter of 2020. Decreased demand from China for crude oil fell by about 3m barrels per day, equivalent to 20% of total demand, in light of the implications of the spread of the Coronavirus.
American energy companies raised the number of oil rigs operating for the third week in four, even as producers plan to continue to cut spending on new drilling activities for the second year in a row in 2020.
Brian Gilvary, the chief financial officer of BP, said that the slowdown in global economic growth in the wake of the Coronavirus outbreak in China will reduce global demand for oil in 2020 by up to 0.5%.