As of Thursday (February 6), the coronavirus outbreak had claimed 565 lives, and more than 28,000 cases had been confirmed in China and around the world.
The developing story that is the Wuhan coronavirus has been wreaking havoc for commodities, with the oil industry feeling the brunt of a fall in energy demand.
In China, short-term sales of crude oil and natural gas slowed to a crawl this week, while internal quarantines, work stoppages, extended public holidays and halts on flights in and out of the country by foreign airlines disrupted the market.
China is the world’s largest importer of crude oil, and normally consumes as much as 14 million barrels per day. But with so much of the country put on hold while authorities grapple with a spiraling number of infections, demand has gone off a cliff to the tune of a 20 percent decrease in daily consumption.
Oil has been on a downward trajectory for most of 2020 as the scale of the outbreak — which the World Health Organization has called a “public health emergency of international concern” — has increased.
Brent crude has fallen to US$55.28 per barrel after starting 2020 at US$66, while West Texas Intermediate (WTI) crude is down to US$50.70 after starting the year at US$61.60.
Both Brent and WTI briefly edged below US$50 for the first time since January 2019.
The heavyweight oil cartel OPEC has been gathering attention to itself through the week as its members met in Vienna to discuss what to do about crashing demand. Saudi Arabia is pushing for drastic cuts in production, though no agreement could be made after Russia reportedly pushed back on the cuts.
Saudi Arabia’s desired oil production cut of between 800,000 and 1 million barrels per day was too much for the rest of OPEC, as was its compromise cut of 600,000 barrels per day.
Russia is not a member of OPEC, but is the world’s third largest producer of oil behind Saudi Arabia in second place. Saudi Arabia has been roping Russia into OPEC operations through “OPEC plus,” which is OPEC’s effort to increase cooperation with other oil-producing countries to influence supply.
Russia’s rejection of Saudi Arabia’s proposal was reportedly based on timing, with the Wall Street Journal reporting that Russia believes it is too soon to make drastic cuts before fully understanding the impact of the coronavirus on demand.
As of Thursday (February 6), the coronavirus outbreak had claimed 565 lives, and more than 28,000 cases had been confirmed in China and around the world.
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