Opec headquarters in Vienna, Austria. Picture: REUTERS/LEONHARD FOEGER
Opec headquarters in Vienna, Austria. Picture: REUTERS/LEONHARD FOEGER

Vienna — Delegates from oil cartel Opec — as well as their ally Russia (Opec+) — began a meeting at the organisation’s headquarters in Vienna on Tuesday to discuss their reaction to China’s coronavirus epidemic and its effect on global oil demand.

Crude prices have tumbled since the deadly outbreak in the world’s second-biggest economy, which is a huge consumer of crude.

Earlier, the oil ministry of Iraq, Opec’s second-biggest producer, said the bloc was considering a further cut to crude oil output. Opec said on Tuesday that its joint technical committee meeting was briefed on China’s reaction to the crisis by the Chinese ambassador to the UN in Vienna, Wang Qun.

Opec’s secretary-general Mohammad Barkindo “reiterated Opec’s full support to China and praised the leadership for its rapid and strategic response to the outbreak”, the cartel tweeted.

Barkindo called China’s reaction “impressive and commendable”.

Earlier, Iraq’s oil ministry spokesperson Assem Jihad said: “Depending on the needs of the market and how it’s been affected by the coronavirus, will a cut be necessary? This is being discussed as the technical reports are presented.”

Jihad told AFP that any recommendations from the meeting will be relayed to ministers and that “any further cut to outputs will only be announced in a ministerial meeting”.

Jihad said delegates would also consider bringing forward an Opec ministerial meeting planned for March to February “depending on the market’s needs and what happens with the virus”.

Russian energy minister Alexander Novak also said the schedule could be changed. “We have a meeting in March but we can hold it earlier if necessary.” 

‘Psychological factors’

The new coronavirus has killed more than 420 people and infected a further 20,000 in China since emerging in December and has also spread to more than 20 other countries.

The US benchmark oil contract, WTI, has fallen by about 18% over the past month.

At 4.05pm GMT on Tuesday, WTI was trading at $50.56 a barrel and its European equivalent Brent was at $54.79, both up slightly from close of trading on Monday.

“For now, the market seems content that China will contain and manage the virus situation, and that the worst will soon be over with no accelerated spreading outside China, and that Opec+ will step in with cuts and prevent a surplus and a stock building,” said Bjarne Schieldrop, chief commodities analyst at Nordic bank SEB.

Carsten Fritsch at Commerzbank said that “one option is a joint production cut of an additional 500,000 barrels per day (bpd). Furthermore, there are rumours that Saudi Arabia is willing to temporarily reduce its output by as much as 1-million bpd.” 

Top oil exporter and Opec kingpin Saudi Arabia said this week that the impact of the virus on oil demand has been “extremely limited” and “driven by psychological factors”.

But if the virus continues to spread, there could be a more severe hit to the market, said Neil Wilson, chief market analyst for Markets.com in London. “This kind of oil demand shock has not been seen for more than a decade. The longer the lockdown in China and travel restrictions globally, the greater the impact.” 

The 13-member Opec regularly convenes with non-members led by Russia over how to influence oil prices. In December, Opec+ extended an existing agreement to curb crude oil production to prop up prices.