Dubai – Saudi Arabia is closely monitoring developments in global oil markets resulting from “gloomy expectations” regarding the possible impact of the coronavirus on the Chinese and global economy, its energy minister said on Monday.
“OPEC and its allies can respond to any impact on the stability of the oil market if needed,’’ Prince Abdulaziz bin Salman said.
Salman added that he was confident the Chinese government and international community could contain the spread of the virus and fully eradicate it.
The minister said the current impact on global markets, including oil and other commodities, was “primarily driven by psychological factors and extremely negative expectations adopted by some market participants in spite of its very limited impact on global oil demand.”
Crude prices fell more than two per cent to multi-month lows as the rising number of cases of the coronavirus in China and city lockdowns there deepened concerns over oil demand.
Brent crude fell by 1.36 dollars a barrel, or 2.2 per cent, to 59.33 dollars by 0425 GMT, having earlier dropped to 58.68 dollars, its lowest since late October. U.S. crude was down by 1.30 dollars, or 2.4 per cent, to 52.89 dollars, having earlier eased to 52.15 dollars, its lowest since early October.
While most markets are being impacted by the spread of the coronavirus, many are closed in Asia due to Lunar New Year holidays.
“Such extreme pessimism occurred back in 2003 during the SARS outbreak, though it did not cause a significant reduction in oil demand,” Prince Abdulaziz said in a statement.
He said he was confident the kingdom and other members of the Organisation of the Petroleum Exporting Countries (OPEC), along with other producers in a group known as OPEC+, have the capability and flexibility needed to respond to any developments.
“They should take the necessary actions to support oil market stability, if the situation so requires,’’ he noted.
Oman’s oil minister told Reuters that he fully supported Saudi Arabia’s readiness to react to any impact the new coronavirus could have on the market.
Oman is a member of the OPEC+ group.
OPEC+, which includes Russia, has been reducing oil supply to support prices.
It has deepened its agreed output cuts by 500,000 barrels per day (bpd) to 1.7 million bpd through March.
The group meets in March to decide on its output policy.
On Friday, Prince Abdulaziz said the aim of OPEC+ was to cut seasonal inventory builds that typically occur in the first half of the year.
“All options were open when OPEC+ meets in Vienna in March,’’ he said, adding that it was too early to make a call on the need for more cuts.
Health authorities around the world are racing to prevent a pandemic after over 2,000 people were infected with the virus in China and 56 died.
The virus has created alarm because much about it is still unknown, such as how dangerous it is and how easily it spreads between people.
It can cause pneumonia, which has been deadly in some cases.