Posted on Leave a comment

OPEC committee suggests 600,000 bpd production cut

The Joint Technical Committee, which advises the OPEC+ group, has proposed a further production cut of 600,000 barrels per day (bpd) in response to expectations of falling demand triggered by the coronavirus outbreak in China.

A certain degree of oversupply was already expected in the first half of this year, but oil prices have dropped by around 20% since their peak on January 8 over concerns that the outbreak will add to the supply surplus by reducing demand.

There are also signs that the outbreak is already affecting demand. Large numbers of flights have been cancelled and flagging economic activity in China after weeks of lockdown has caused oil imports there to drop from 11 million to 7 million bpd, according to analysts’ estimates.

Concerns were also raised recently by Patrick Pouyanne, the CEO of Total, which also makes lubricants like transmission oil. He predicted that the virus’s effect on the oil markets would be “substantial” because “China will reduce its oil consumption.”

Brian Gilvary, a former chief finance officer at BP, also predicted that due to the virus, demand may be 500,000 bpd lower over the entire year.

The Joint Technical Committee only advises the OPEC+ group, which will make the actual decision at its next meeting. The group was originally set to meet in March to re-evaluate the production cuts it set in December last year, but there are rumours that this may be moved forward to this month in the interests of a prompt response to the outbreak.

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.