Coronavirus could shrink oil demand for first time in a decade

COVID-19 causing first drop in oil use in decade: IEA

IEA: Global oil demand will fall in Q1 for first time in years

"The main reason behind the oil demand growth revision and hence the demand for OPEC crude, is the outbreak of the Coronavirus and its expected impact on China's oil demand and, by extension, global oil demand", OPEC's Monthly Oil Market Report said. "... The consequences of COVID-19 for global oil demand will be significant".

Wednesday's report comes after OPEC members and their allies, including Russian Federation, last week were unable to reach an agreement to deepen production cuts. "The crisis is ongoing and at this stage it is hard to be precise about the impact".

"We have cut our 2020 growth forecast by 365 kb/d to 825 kb/d, the lowest since 2011".

While the brief SARS epidemic of 2003 has at times been used as a reassuring point of comparison, China's economy has changed enormously since then.

The outbreak has shuttered businesses and prompted the quarantine of tens of millions of people in China, the world's biggest crude importer.

USA crude futures have fallen 17% this year as traders assessed the impact of the epidemic.

"There is already a major slowdown in oil consumption and the wider economy in China", the IEA said.

In the meantime, Russian oil producers favour extending oil production cuts rather than deepening them, S&P Global Platts reported on Friday, citing Russian oil giant Gazprom Neft's CEO Alexander Dyukov.

"Demand is now expected to fall by 435,000 barrels year-on-year in the first quarter of 2020, the first quarterly contraction in more than 10 years" when it dropped during the global economic crisis, it added.

Crude prices have plunged about 20% from their 2020-peaks on January 8 as oversupply concerns combined with worries about large fuel demand declines in China as the country's quarantine to fight a coronavirus outbreak has halted economic activity. That industry is likely to remain resilient against the price slump until later in the year, it predicted.

Given the abundance of supply, disruptions in OPEC members such as Libya and Nigeria are having little impact on prices, the agency said.

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