By Adedapo Adesanya
Oil prices had their major test last week as the spread of the coronavirus continued, letting loose bears into the global oil market, with major futures dropping over $3 per barrel.
With drop in demand continuing, affected and unaffected countries have isolated citizens evacuated from the Chinese city of Wuhan in order to curb the contagious epidemic.
There have been restrictions on travel too with over 360 people killed and over 17,000 affected. With figures expected to continue to rise, there are serious worries on the impact this disease will have on the world’s second-biggest economy as well as the global markets.
Multinationals are already closing their operations in China. Last week, the British Airways suspended certain flights to China as travel warnings issued by governments made passenger numbers drop.
Last week, the Organisation of the Petroleum Exporting (OPEC) disclosed that it was considering holding an emergency meeting in February as prices hit worrying levels.
According to the Algerian Energy Minister, Mr Mohamed Arkab, the producer group’s meeting earlier scheduled for March 2020 is likely to be moved to February, adding that a decision may be taken in the coming days.
This was backed up by Russian Energy Minister, Mr Alexander Novak, who said on Friday that his country was ready to bring forward a meeting of OPEC and its allies to February from March to address a possible hit to global oil demand from the virus.
Mr Novak said he was in discussions with OPEC leader, Saudi Arabia, and that the oil-producing nations would need several more days to assess the impact and decide on the date of the meeting.
OPEC’s oil output fell in January to the lowest since 2009 after several members led by Saudi Arabia over-delivered on a new agreement to cut production and as Libya’s supply slumped, its first monthly report revealed.
With the date for the OPEC+ meeting expected to be confirmed this week, many pointers show that improvement are not expected anytime soon as the coronavirus continues to shut down factories, and therefore production.
With the outbreak having a comparable effect as the SARS which occurred in 2003, the demand for oil in China is likely to reduce by roughly 400,000 barrels per day and being a primary importer of the commodity, this will be felt.
Expectations early in the week are for the Brent Crude to trade down at $55 per barrel, while the US West Texas Intermediate (WTI) could touch $50 per barrel.
As at the time of this report, Brent was trading down by 21 cents or 0.37 percent to $56.41 per barrel, while the WTI crude was up 11 cents or 0.21 percent to settle at $51.67 per barrel.
