Goldman Sachs said that global oil demand may slip by 260,000 barrels a day this year/Bloombergby Bloomberg
Saudi Arabia, the world’s top oil exporter, has urged caution against ‘gloomy expectations’ regarding the possible impact of the spread of the coronavirus on the global economy and oil demand.
Bloomberg reported that oil tumbled to the lowest in more than three months on fears China’s deadly coronavirus will hit demand in a market that already has plentiful supply.
Prince Abdulaziz bin Salman, the Saudi Energy Minister, said, “The current impact on global markets, including oil and other commodities, is primarily driven by psychological factors and extremely negative expectations adopted by some market participants despite its very limited impact on global oil demand.”
The Saudi Energy Minister added that such extreme pessimism occurred back in 2003 during the SARS outbreak, though it did not cause a significant reduction in oil demand.
Similarly, the UAE Minister of Energy echoed the same sentiments, adding that oil market should not overreact to the possible impact of an outbreak of coronavirus in China on demand.
The virus is the latest upheaval for the oil market, which is has been struggling with demand concerns for months. Investors are selling crude and other commodities amid a broad withdrawal from riskier assets and fears the virus will curtail fuel consumption as travel is restricted.
Mohamed Arkab, the OPEC President said that he expects an outbreak of coronavirus in China to have little impact on the global oil market for now but added that producers were ready to react to any new developments.
Using the 2003 SARS epidemic as a guide, Goldman Sachs said that global oil demand may slip by 260,000 barrels a day this year and could shave almost $3 from the price of a barrel of crude.
China extended the Lunar New Year holiday by three days until 2 February 2020 while companies in Shanghai have been asked not to start work until at least 9 February 2020. There are more than 2,700 confirmed cases of infection in China so far. Canada confirmed its first while the US announced a fifth, as the virus spread to at least 15 countries and territories.