OPEC members and their ally Russia are discussing a further cut to crude oil output at a meeting in Vienna because of China’s coronavirus epidemic, Iraq’s oil ministry said Tuesday.
Crude prices have tumbled since the deadly outbreak in the world’s second-biggest economy, which is a huge consumer of crude.
The Organization of the Petroleum Exporting Countries is holding a meeting of a “joint technical committee” in Vienna on Tuesday and Wednesday to discuss the virus’s impact and whether an output reduction is needed.
“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,” said Iraq’s oil ministry spokesman Assem Jihad.
“The technical committees are discussing the recommendations, which they will elevate to their ministers. Any further cut to outputs would only be announced in a ministerial meeting,” Jihad told AFP.
He said those gathered would also consider bringing forward a March ministerial meeting to February “depending on the market’s needs and what happens with the virus.”
Iraq is OPEC’s second-biggest oil producer.
The new coronavirus has killed more than 400 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 around 18 percent over the past month.
“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 of 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.
Top oil exporter and OPEC kingpin Saudi Arabia said this week that the impact of the virus on oil demand was “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 over a decade. The longer the lockdown in China and travel restrictions globally, the greater the impact,” he said.
Russian energy minister Alexander Novak, said Friday the crisis could lead to lower demand for hydrocarbon fuels.
The OPEC cartel regularly convenes with non-members led by Russia over how to influence oil prices.
OPEC and its allies in December extended an existing agreement to curb crude oil production to prop up prices.