Opec+ full of ideas to tackle drop in oil demand, says Saudi minister

Opec+ is considering all options to mitigate the impact of the coronavirus on oil markets, Saudi Arabia’s energy minster said.

Brent has declined nearly $10 since January when fears heightened over the rapid spread of the virus and prompted China to control population movement to contain the outbreak, which disrupted global supply chains and trade.

“We are communicating with each other at every opportunity,” Prince Abdulaziz bin Salman said at an energy conference in Riyadh. “The Opec secretary general is attending this conference, and we just had a chat. We did not run out of ideas,” he added.

Oil jumped following his remarks, with Brent, the widely-used international benchmark gaining 1.2 per cent, before retracting 0.48 per cent to $56.03 per barrel at 3.19pm UAE time.

West Texas Intermediate, which largely tracks North American crude grades fell 0.62 per cent to $51.11 per barrel.

Opec+, as the alliance led by Saudi Arabia and Russia is known, is set to meet on March 5 and 6 in Vienna to review its pact to curb production by 1.7 million barrels per day. A technical committee recommended retaining the agreement until year-end to offset the slowdown in demand growth.

The committee also suggested short-term additional cuts of 600,000 bpd until the second quarter. However, Opec+ held back on action as Russia, the largest producer within the group, remained sceptical about the effect of the virus and said it needed more time to assess the situation. Leading Opec producers were earlier said to be going alone in undertaking additional cuts. Prince Abdulaziz, however, dismissed the reports and said the group believes in collective action.

Oil markets would need additional Opec+ cuts in 2020, Bank of America said in its medium-term outlook for crude. The bank expects Brent to average $62 per barrel this year, supported by voluntary restrictions from Saudi Arabia, Kuwait and the UAE, as well as involuntary loss due to sanctions against Venezuela and Iran.

“In our balances, we project a 1.2 million bpd drop in Opec supply from 4Q19 into 4Q20 and then we assume roughly stable output for the group through 2025,” the bank said.