The world’s leading oil producers are preparing to consider reducing their production to counter the negative effects of the spread of the Coronavirus. OPEC representatives and its allies are expected to meet this week amid increasing calls for action to support oil prices.
The oil prices affected by the spread of Coronavirus
Coronavirus and oil prices
Crude oil reached its lowest level in a year, after falling by 20 percent, since its rise in January.
- Why does the spread of the virus affect so much the global energy market?
- Why did the world oil prices drop?
With the official leave of the Chinese New Year extended to most parts of China and travel and transportation restrictions imposed, factories, offices, and stores closed.
This means that the largest importer of crude oil, which normally consumes 14 million barrels per day. It does not need much oil to operate factories, to operate the transportation, and to maintain the lighting.
The spread of Coronavirus
The spread of the virus is likely to be particularly significant in the demand for jet fuel, with international airlines suspending flights to China, and restricting travel within China itself means reducing flights.
Bloomberg reported this week that:
- China‘s daily consumption of crude oil fell by 20 percent.
- It is equivalent to the needs of Britain and Italy combined.
- Which is the largest reduction in more than ten years.
What does this mean for the impact of the spread of the virus on the global economy?
- The sharp decline in oil demand is a symptom of the reduction in commercial activity in China.
- A sign of slowing economic growth in the country, which reached a level not reached in three decades.
The major global economic growth
- China is the world’s second-largest economy.
- It is a major driver of global economic growth, as developing countries struggle to revive their growth.
- Any negative impact will be echoed in China around the world.
A race against time to develop a vaccine for Coronavirus
The International Monetary Fund head, Kristalina Georgieva, said this week that:
- The epidemic is likely to slow global economic growth, in the short term, at least.
- But she warned that it was too early to predict what would happen.
- Eventually, “We must assess how quickly and how effective it will be to combat the spread of the virus.”
What do oil producers expect to do?
- It is reported that the world’s largest oil producers are discussing a proposal for deeper cuts, not seen since 2016, to revive lower prices.
- In addition, Iran, a member of OPEC, called on Monday to take measures to support oil prices after the Coronavirus struck by demand.
- As well as, The OPEC statement came on the heels of reports that the so-called (OPEC +).
- Includes Russia will discuss reducing production by between 500,000 and 1 million barrels per day, at a meeting expected to hold this week.