New Coronavirus Causes Global Economy to 'Plummet'... Oil-Producing Countries Consider Additional 'Production Cuts'

[Asia Economy Reporter Naju-seok] Due to the expected sharp decline in crude oil consumption caused by the novel coronavirus infection (Wuhan pneumonia), there are expectations that oil-producing countries will implement additional production cuts.

On the 3rd (local time) at the New York Mercantile Exchange (NYMEX), March delivery West Texas Intermediate (WTI) crude oil closed at $50.11 per barrel, down 2.8% ($1.45) from the previous trading day. During the session, WTI even dropped to as low as $49.92 per barrel.

The international oil price being threatened at the psychological resistance level of $50 per barrel is due to the novel coronavirus. Concerns are rising over a decline in global trade volume, contraction of the travel industry, and slowing growth rates caused by the virus.

In particular, the fact that the outbreak originated in China, the world's largest crude oil consumer, is also having a negative impact. According to Bloomberg News, the novel coronavirus crisis has reduced China's crude oil consumption by 3 million barrels per day, which accounts for 20% of its consumption. This is the largest demand drop in the oil market since the 2008 economic crisis.

The Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC members such as Russia plan to hold a public technical committee meeting over two days starting from the 4th to discuss countermeasures. Based on the outcome of this meeting, there is speculation that an OPEC Plus (+) meeting involving both OPEC and non-OPEC members will be held next week to decide on production cuts.

The Wall Street Journal (WSJ), citing OPEC officials, reported that Saudi Arabia is considering reducing crude oil production by an average of 500,000 barrels per day until the end of this crisis. Previously, OPEC had agreed to cut production by 500,000 barrels per day until March. If additional cuts are made due to the novel coronavirus, the total reduction could reach 2.2 million barrels per day.

A Swedish expert stated, "Demand in China has decreased by 3 million barrels per day, and the novel coronavirus is still not losing momentum," adding, "A 500,000 barrel cut is not sufficient, but it would be positive for the oil-producing countries participating in the cuts." Energy consulting firm JBC forecasts that China's crude oil consumption will decrease by more than 1 million barrels per day on average this month and next month.

This content was produced with the assistance of AI translation services.