OPEC looks to cut production as virus outbreak hits demand
Stalled air travel and manufacturing all but stopped in China, sapping demand for fuel following plunging crude prices.
VIENNA — The oil-producing countries of the OPEC cartel are considering slashing output to contain a price plunge intensified by the virus outbreak.
The meeting of oil ministers from the group’s 14 countries on March 5 was visibly impacted by the coronavirus as journalists were barred from the headquarters building and set up outside to try to briefly interview arriving officials.
Since the new coronavirus outbreak began in China last month, air travel to the country – the world’s second-largest economy – has all but stopped, sapping demand for aviation fuel. Manufacturing, meanwhile, was idled as cities with millions of residents locked down to contain the spread of the virus. Major companies around the world have halted business travel out of precaution.
Oil prices stabilized ahead of this week’s meeting on expectations that OPEC and non-OPEC members would agree to deeper production cuts. Some analysts predict the cartel will agree to slash production by 1 million barrels per day, on top of existing cuts. Crude prices have fallen 25% since January.
In December, OPEC oil-producing countries and Russia agreed to cut production by 1.7 million barrels per day, up from the 1.2 million barrel per day cut they had been observing for the previous three years.
Iranian Oil Minister Bijan Zangeneh told the Shana news agency that “we have oversupply… and it’s necessary that OPEC and non-OPEC do something for the balance of the market.”
He noted, however, that Russia – which is not part of OPEC and would join the discussions on MArch 6 – “would resist until the last moment” any production cuts.
Countries have been abiding by the cuts unevenly, with some nations quietly producing more than they agreed to. And OPEC’s decisions to cut production have dwindling ability to boost oil prices, in part because the U.S. has been flooding the market with cheaply-produced crude.
The international benchmark for crude was trading at $51.83 a barrel on March 5, down from around $69 at the start of the year.