The Organization of the Petroleum Exporting Countries (Opec) grouping on Wednesday slashed the global oil demand growth by 0.99 million barrels per day (mbpd) in 2020, with the Coronavirus outbreak in China accounting “for most of the downward revision”.
The demand was lowered by 0.23 mbpd Concerned over the situation, the Opec may advance its 5-6 March meeting, with its technical panel recommending a provisional cut to the Opec plus arrangement.
This assumes importance given that any further supply cuts will have wide-ranging impact on energy markets, as Opec accounts for around 40% of global production. With Opec accounting for 80% of India’s crude oil imports, any production cut by the so called Opec plus arrangement may also compromise India’s energy security efforts in the short run. India is the world’s third-largest crude oil buyer and the fourth-largest LNG importer.
“Oil demand growth in 2020 is revised down by 0.23 mb/d from the previous month’s assessment. With this, global oil demand is now forecast to grow by 0.99 mb/d and average 100.73 mb/d for 2020, with OECD oil demand growing by 0.01 mb/d in 2020, while non-OECD oil demand is growing by 0.98 mb/d. The outbreak of the Coronavirus in China during 1H20 is the major factor behind this downward revision,” Opec said in its Monthly Oil Market Report.
A novel coronavirus outbreak in China has caused oil demand to plunge in the world’s second-biggest economy, forcing state-run CNOOC, China’s biggest LNG importer, to suspend contracts. Several refineries, including Sinopec, the world’s largest refiner, plan to reduce output or shut plants.
This has also led shipping rates to fall. Trade tensions and a slowing global economy also have an overhang on energy markets.