Uncertainties surrounding the coronavirus outbreak that started in China, the world’s leading oil importer, will depress global oil demand growth this year, the Organization of the Petroleum Exporting Countries (OPEC) warned on Wednesday.
In its monthly report, OPEC said that world oil demand is now expected to rise by 990,000 barrels per day (bpd) this year – roughly 19 percent less than previously forecast.
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“The impact of the coronavirus outbreak on China‘s economy has added to the uncertainties surrounding global economic growth in 2020, and by extension global oil demand growth,” the report said.
“Clearly, the ongoing developments in China require continuous monitoring and assessment,” it added.
The report also noted that January saw a sharp decline in OPEC’s output as producers implemented a new production-cut pact that the cartel’s allies agreed to in December in order to buoy crude prices.
The revised forecast for global oil demand could bolster the case for even more production curbs. Last week, a technical panel advising OPEC and its allies, a grouping known as OPEC+, recommended an immediate additional output cut of 600,000 bpd.
OPEC and its allies led by Russia have implemented such curbs since 2017 to revive prices that had become depressed by a glut of crude.
Global benchmark Brent crude has fallen to around $55 a barrel this year, alarming producers.
In January, OPEC members over-delivered on production cuts to which they had agreed, lowering supply by 509,000 bpd to 28.86 million bpd, according to sources cited in the report. Russian output, however, increased.
OPEC also trimmed its 2020 forecast for growth in non-OPEC supply to 2.25 million bpd, 100,000 bpd less than previously forecast.
While a slowdown in non-OPEC supply would help the cartel’s efforts to manage the market, non-OPEC output is still expected to grow at over twice the rate of world oil demand in 2020.
The coronavirus outbreak has some analysts questioning whether crude prices may have bottomed out on hopes the virus impact will peak this month.
However, the World Health Organization (WHO) on Wednesday cautioned that it is “way too early” to say whether Covid-19, the formal name for the coronavirus pathogen, had peaked, following a drop in the number of new cases.
“I think it’s way too early to predict the beginning, the middle or the end of this epidemic right now,” said Michael Ryan, head of the WHO’s health emergencies programme.