Saudi Arabia, the kingpin of Organization of Petroleum Exporting Countries (OPEC), is reportedly pushing for a deep, short-term oil production cut in response to waning demand triggered by the coronavirus outbreak.
Representatives of OPEC and its allies, known as OPEC+, are scheduled to meet on Tuesday and Wednesday to discuss possible scenarios for how to respond to ebbing demand from China, the world’s largest oil consumer and the epicentre of the coronavirus outbreak.
Fears over how coronavirus could ripple through China and the broader fabric of the global economy hammered oil futures in January which witnessed the biggest monthly crude price drop in 30 years.
One option being discussed by OPEC+ could see Saudi Arabia spearhead a collective output cut of 500,000 barrels a day until the crisis has passed, the Wall Street Journal, reported citing OPEC officials, and Reuters News Agency reported, citing two OPEC sources and a third industry source.
Another scenario under consideration could see the kingdom implement a temporary cut of 1 million barrels a day to jar oil prices, cartel sources tell the Wall Street Journal.
The cartel and 10 allied nations led by Russia have yet to agree on how to respond to falling crude demand in China in the wake of the coronavirus outbreak.
Saudi Arabia wanted OPEC+ to schedule an emergency meeting of its full delegation, but the meeting this week will only be a technical one to discuss the impact of the outbreak on oil markets and produce recommendations to members, according to the Wall Street Journal.
Cartel officials have told the Wall Street Journal that after this week’s meeting, producers will decide whether to hold a Joint Ministerial Monitoring Committee led by Saudi Arabia and Russia, or a later summit of all 23 producers in Vienna.
OPEC sources have also told Reuters the group and its allies are also considering holding a ministerial meeting over February 14-15, ahead of a previously scheduled March meeting.
Brent crude was down 48 cents at $56.14 a barrel by 1320 GMT, having earlier lost more than $1 to its lowest since January last year at $55.42.
US West Texas Intermediate (WTI) crude fell 10 cents to $51.46 after hitting a session low of $50.42, also the lowest since January last year.
As the coronavirus outbreak hit fuel demand in China, refiner Sinopec Corp told its facilities to cut throughput this month by about 600,000 barrels per day (bpd), or 12 percent – the steepest cut in more than a decade.
Independent refineries in Shandong province, which collectively import about a fifth of China’s crude, cut output by 30-50 percent over a little more than a week, executives and analysts said.