The cartel reduced projections for demand growth in the first quarter by 440,000 barrels a day, or about a third, in its monthly report. Oil prices sank to a one-year low on Monday as the infection leaves businesses idle and millions quarantined in the world’s biggest crude importer.
Oil’s slump has spurred the Organization of Petroleum Exporting Countries’ (Opec’s) biggest exporter, Saudi Arabia, to press fellow members and allies to hold an emergency meeting and consider new output cutbacks. Yet the proposal has so far met resistance from Russia, the group’s most important ally, which is able to weather lower prices more easily.
The report showed that, even though many Opec members made a strong start with fresh output curbs that took effect last month, the virus’ impact on consumption will leave them with a new overhang. The group collectively pumped 28.86 million barrels a day in January, and if it maintains that rate there will be a surplus of 570,000 barrels a day during the second quarter, when consumption slows down seasonally. The monthly report is compiled by Opec’s Vienna-based research department.
Opec doesn’t see the effects of the disease confined to the start of the year, bringing down its growth estimate for global oil demand in 2020 as a whole by about 230,000 barrels a day to just under 1 million a day. Still, the increase remains slightly higher than last year’s.
Though crude futures have recovered on speculation the spread of the disease could be nearing its peak, prices of about $55 a barrel in London remain well below the levels most Opec members need to cover government spending.