OPEC scrambles to react to falling China oil demand

Officials of some of the world’s largest oil producers are scrambling to stem a sharp fall in prices over concerns that the growing coronavirus epidemic will reduce demand from China, the biggest importer.

Over the weekend, officials from OPEC, as well as Russia, agreed to meet Tuesday and Wednesday in Vienna, where OPEC has its headquarters, to discuss the situation in the oil markets, according to two people briefed on the plans.

The big producers are also discussing whether to schedule an emergency ministerial-level meeting this month, moving up a gathering planned for early March. On the agenda might be production cuts of up to 1 million barrels a day, or about 1 percent of world supplies, according to a person familiar with the matter.

“They are absolutely trying to put a floor under prices,” said Amrita Sen, chief oil analyst at Energy Aspects, a market research firm.

The price of Brent crude, the international benchmark, has fallen about 19 percent over the past month to less than $55 a barrel, the lowest in more than a year. The plunge has undercut the effect of the carefully orchestrated production cuts that OPEC announced at its December meeting in Vienna. West Texas Intermediate, the U.S. benchmark, entered a bear market Monday, which means it is down more than 20 percent from its January high.

OPEC seems unlikely to stem the price declines soon. Sen said China was already reducing its orders for March from Saudi Arabia, the de facto leader of

OPEC and the world’s largest oil exporter. It is too late to cut February orders. China is also cutting supplies from Africa and Latin America.

China is Saudi Arabia’s most important customer and, along with other Asian countries like India and South Korea, is increasingly vital for the big oil producers around the Persian Gulf. Any slowing of these economies will sap demand for oil, hitting prices and the revenues that OPEC governments depend on.

OPEC is likely to make some cuts, Sen said, but that may not be enough to bolster skittish markets. “People are fearing the worst,” she said.

Chinese oil demand already appears to have crashed as the lockdown of Wuhan and other cities and overall fear curb air travel, driving, trucking and factory use.