OPEC slashes oil demand forecast by 230,000bpd
The Organisation of Petroleum Exporting Countries has slashed about 230,000 barrels per day from its 2020 world oil demand forecast due to the coronavirus outbreak.
OPEC said on Wednesday that the coronavirus in China was making it difficult to forecast the trajectory of the global economy, even as it continued to lobby Russia to sign off on a deal to cut oil production, according to S&P Global Platts.
The virus outbreak has caused a slowdown in Chinese economic activity and suspensions of hundreds of flights, as the death toll continues to rise.
The estimate, contained in OPEC’s latest monthly oil market report released on Wednesday, indicated that OPEC will have to rein in some 570,000 bpd – or about two per cent — of its production during the second quarter from its January output, if it wants to prevent an oversupply.
That could be difficult if war-battered Libya sees a blockade on its oil ports lifted or if OPEC and its allies, including Russia, fail to agree on a deal to deepen their production cuts soon, according to S&P Global Platts.
OPEC and 10 countries, in a 23-member alliance called OPEC+, have largely backed a technical committee recommendation to institute 600,000 bpd in fresh production cuts, with the principal exception of Russia, which said on Tuesday that it was still studying the proposal.
“The impact of the coronavirus outbreak on China’s economy has added to the uncertainties surrounding global economic growth in 2020, and by extension global oil demand growth in 2020,” OPEC said in the report.
“Clearly, the ongoing developments in China require continuous monitoring and assessment to gauge the implications on the oil market in 2020.”
Russian Energy Minister, Alexander Novak, met with the heads of domestic oil companies on Wednesday, and OPEC officials said they were hopeful of receiving an indication of whether the country will approve the deal.
OPEC+ ministers are next scheduled to gather on March 5-6 in Vienna, though delegates have said the meeting could be moved forward to immediately implement the new cuts if there is a consensus to do so.
In its report, OPEC projected that global oil consumption in 2020 will average 100.73 million bpd. That is a 990,000 bpd rise from 2019, which is down from January’s growth forecast of 1.22 million bpd.
“The coronavirus outbreak is expected to mainly impact the Asian jet fuel and gasoline markets due to the suspension of flights and select road transportation services in China,” OPEC said. “However, the full extent of the coronavirus impact on product markets should be more evident in the coming months.”
The demand write-down outpaces OPEC’s downward revision of its non-OPEC supply forecast, which is expected to average 66.60 million bpd in 2020, up 2.25 million bpd from 2019. January’s report had forecast growth of 2.35 million bpd.