Opec chops global oil demand growth forecast over China virus

Oil traders are betting the economic impact of the coronavirus would be short-lived

Oil traders are betting the economic impact of the coronavirus would be short-lived

The agency also cut its 2020 demand growth forecast by 365,000 barrels per day to 885,000.

The steady pricing comes on the heels of the Organization of the Petroleum Exporting Countries (OPEC) lowering its 2020 demand forecast for its crude by 200,000 barrels per day (bpd) on Wednesday.

With markets hoping for OPEC+ to either deepen or extending oil output cuts, the WTI extended its rebound and rose above the $52 mark for the first time in February. "Lower-than-expected consumption in the OECD trimmed 2019 growth to 885 kb/d", the report said.

Although markets have rebounded in recent days as investors grew confident that China could quickly contain the virus and its economic impact would be short lived, the IEA warned against complacency by comparing today's crisis to the 2003 SARS outbreak. Its oil demand has nearly doubled since 2003 and represented more than three-quarters of global oil demand growth past year.

US crude futures have fallen 17% this year as traders assessed the impact of the epidemic. Consumers are unlikely to benefit from the drop in fuel prices because the disease will inflict damage on the wider economy, the IEA said.

Oil prices were steady on Friday but are set for their first weekly gain in six weeks on the assumption major producers will implement deeper output cuts to offset slowing demand in China, the world's second-largest crude user. However, Russia, the kingdom's most important partner in managing supplies, has so far resisted the initiative.

Crude prices have plunged about 20% from their 2020-peaks on January 8 as oversupply concerns combined with worries about large fuel demand declines in China as the country's quarantine to fight a coronavirus outbreak has halted economic activity.

"Evidently, the timing of the outbreak exacerbated the impact on transportation fuel demand in China, as it coincided with the Chinese Lunar New Year holidays, as millions of Chinese return home to celebrate with family members and friends, or travel overseas", OPEC said. That industry is likely to remain resilient against the price slump until later in the year, it predicted.

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