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Coronavirus rages in the oil market

Economy Writing with agency information.

OPEC meets in Vienna to discuss how the virus could impact the demand for crude oil in China, the world’s first importer of this matter. Analysts foresee greater cuts in the production of the countries of the group.

From this Tuesday, and until Wednesday, the Organization of Petroleum Exporting Countries (OPEC) holds an extraordinary meeting to analyze the impact of the coronavirus on oil prices, which are plummeting: in less than a month they fell 20%.

Oil prices have fallen sharply since the beginning of the year because of the growing concern about China’s economy, affected by the new coronavirus epidemic in the center of that country.

Also read: How can coronaviruses impact the global economy?

The concerns have to do with the possibility of the Chinese economy to resume activities since yesterday, when the holidays for the Chinese New Year were officially over.

However, several companies will not work until next week by order of the governments of several provinces. According to Bloomberg calculations, this extension of the cessation of operations would cover the provinces where about 70% of Chinese GDP production is concentrated.

OPEC’s concerns are related to the projected demand for oil for this year which, according to the organization’s calculations at the beginning of the year, would be almost 101 million barrels per day: much of this oil appetite corresponds to China; or at least it was until before the onset of the coronavirus.

In New York, the WTI barrel in contracts for March dropped 2.81% and ended at US $ 50.41. Since January 6, both types of crude have lost more than 20% in a depressed market.

Prices have been low for weeks because of the coronavirus that is spreading from China. Investors fear that the epidemic will have dire consequences for China’s economy, the first importer and second largest consumer of crude oil.

At the moment, around the economic impact of the coronavirus there is little concrete data and too much uncertainty, which has dealt a blow to world markets.

One of the main challenges facing the Organization of Petroleum Exporting Countries and its large oil-producing counterparts is that they have no idea how big the problem they face is. At this point, estimates of the impact of the epidemic on oil demand vary widely. S&P Global Platts expects an “almost catastrophic” fall in world oil demand by 2.6 million barrels per day in February and two million barrels by March, in the worst case.

China is the major recipient of oil exports from the Persian Gulf countries members of the oil organization. According to Bloomberg data, a quarter of foreign sales of these nations went to the Chinese market.

Also read: How long will the consensus hold in OPEC?

Earlier this month, OPEC’s own forecasts showed that the world’s most populous country accounts for more than a quarter of all oil demand growth worldwide this year. The International Energy Agency saw that it had an even more important role, with almost 40% of the incremental demand in China.

Analysts speculate on that meeting could be considered a supplementary reduction in demand in the order of between 500,000 and one million barrels per day. The eventual recommendation of the technicians will be considered at the OPEC ministerial meeting scheduled for early March.

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2020-02-04T07: 12: 17-05: 00

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2020-02-04T10: 30: 21-05: 00

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Economy Writing with agency information.

Economy

Coronavirus rages in the oil market

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