An advisory body to Opec and its allies has recommended that producer countries significantly deepen their oil supply cuts in response to the spread of the deadly coronavirus outbreak and its potential impact on economic growth and crude consumption.
The technical committee, which includes representatives from Saudi Arabia and Russia, met for three days in Vienna and concluded on Thursday that producers make supply curbs of 2.7m barrels a day.
Opec and other producers had already agreed in December to remove 1.7m b/d for three months starting in January. Saudi Arabia, Opec’s largest producer, then pledged additional cuts of 400,000 b/d.
The advisory body recommended a further 600,000 b/d in curbs in response to sliding oil prices that have fallen by more than 20 per cent from an early January high to $55.42 a barrel.
Chinese energy industry executives have projected a 25 per cent drop in the country’s oil demand in February — amounting to more than 3m b/d and 3 per cent of global consumption — with questions mounting about the impact over the course of 2020.
Opec’s own forecasts showed oil demand growth falling by 200,000 b/d on average this year, according to one source. UK oil major BP estimated higher figures of 300,000 to 500,000 b/d, which is a hefty chunk of the 1.2m b/d expected by global energy agencies.
Saudi oil production has already quietly fallen more deeply that it pledged in December. Production so far in February has averaged 9.6m b/d.
The original round of cuts were due to expire in March, but are likely now to be extended.