Oil prices fell to their lowest level since January 2019 on Monday on weaker Chinese demand in the wake of the coronavirus outbreak and as traders waited to see if Russia would join other producers in seeking further output cuts.
Oil has dropped more than 20% from a peak in January after the spreading virus hit demand in the world’s largest oil importer and fueled concerns of excess supplies.
“The question everyone is desperate to find the correct answer to is how damaging the epidemic is to the global economy and therefore to oil demand and how long it will last,” said oil broker PVM’s Tamas Varga.
“No-one knows but as of today the crisis has not been contained, it is spreading and it has already claimed more lives than the SARS virus in 2003.”
Beijing has orchestrated support for its companies and financial markets in the past week and investors are hoping for more stimulus to lift the world’s second-biggest economy.
Worries over supply were not alleviated on Friday when Russia said it needed more time to decide on a recommendation from a technical committee that has advised the Organization of the Petroleum Exporting Countries and its allies to cut production by a further 600,000 barrels per day (bpd).
The group, known as OPEC+, has been implementing cuts of 1.2 million bpd since January 2019.
Algeria’s oil minister Mohamed Arkab said on Sunday the committee had advised further output cuts until the end of the second quarter.
“The coronavirus epidemic has a negative impact on economic activities, especially on the transport, tourism and industry, in China particularly, and also increasingly in the Asian region and gradually in the world,” Arkab said.
Russia Energy Minister Alexander Novak said Moscow needed more time to assess the situation, adding that U.S. crude production growth would slow and global demand was still solid.
“The oil market will be waiting on Russia’s response, to see if the OPEC+ can prove itself as being proactive producer group in dealing the coronavirus virus outbreak which, like SARS, is effectively a negative demand shock,” BNP Paribas analyst Harry Tchilinguirian told the Reuters Global Oil Forum.
Oil traders also said they were concerned the proposed reduction would not be sufficient to tighten global markets as China’s state refiners have said they would cut refining throughput by about 940,000 bpd this month.