Just when the oil producing countries did not want another jolt to waning crude oil prices, and just when they did not want another shove to their production curtailing efforts to bolster oil prices, Coronavirus has hit hard. Oil prices have come crashing down in last one month to a three-month low as the first case of Coronavirus was detected on Dec 31, 2019.
As volatile and vulnerable, crude oil prices have lost over 10 percent since the outbreak of the virus in Wuhan city of China – even Libya’s production falling by around a million barrel per day has not been able to provide floor here. Spiraling down, crude oil prices have rightly responded to the deadly virus with fears of demand destruction from one of the largest consumers and importers of oil - China.
Moreover, OPEC’s and its allies’ plans have come crashing down amid brimming US supplies and the demand destructor virus.
Reading the alarm signs - and now a world health emergency declared by WHO – the buzz in the oil market is that the OPEC+ next meeting scheduled for March 2020 might be called as early as first week of February 2020 to address the price challenge. Is another production cut on the cards? And that too earlier than expected? Such perceptions can push prices down further.
Outbreak of Coronavirus has left around eight thousand people infected and over 170 dead, which has resulted in multinationals reportedly closing their operations in China, and international airlines suspending their flights to the country. Not only will this affect the direct consumption for gasoline and jet fuel, but also fuel decline in China’s already slowing demand. Investors fear that the virus will take a bite out of Chinese growth, where estimates are staggeringly high when compared to SARS outbreak of 2004. Prospects of a partial resolution of US-China trade war are also now being undermined and threatened. Looks like luck is not going to be in favour of oil producing countries in 2020.