Saudi Arabia, the world’s top oil exporter, urged caution on Monday against “gloomy expectations” regarding the possible impact of the spread of the coronavirus on the global economy and oil demand.
The death toll from the coronavirus outbreak in China rose to 81 with more than 2,700 infected, while health authorities around the world stepped up screening of passengers from China.
Crude prices fell about 3% on the day as the rising number of cases and China’s city lock downs and extension of its Lunar New Year holiday deepened concerns over oil demand.
But Saudi Energy Minister Prince Abdulaziz bin Salman said the impact being seen on oil and other markets was “primarily driven by psychological factors and extremely negative expectations adopted by some market participants despite its very limited impact on global oil demand.
“Such extreme pessimism occurred back in 2003 during the SARS outbreak, though it did not cause a significant reduction in oil demand,” the minister said in a statement.
Fellow Gulf OPEC oil producer United Arab Emirates echoed the Saudi minister’s comments.
“It is important that we do not exaggerate projections related to future decreases in oil demand due to events in China,” UAE Minister of Energy Suhail al-Mazrouei said.
“OPEC and OPEC+ member countries will discuss market conditions (in March) and, if required, all options to ensure continued market balance,” he said.
The Saudi minister also said OPEC and its allies could respond to any impact on the oil market, adding he was confident China and international authorities could contain the virus.
Algeria’s Energy Minister and current President of OPEC Mohamed Arkab, also referring to the outbreak, said that “the impact on the outlook for global oil demand would … be small”.
Brent crude futures were down around 2.8% at $59.01 by 1402 GMT having earlier dropped to $58.50. U.S. crude was down by 2.6% at $52.77, having earlier eased to $52.13. Both hit their lowest levels since October.
Prince Abdulaziz said he was confident the Organisation of the Petroleum Exporting Countries (OPEC) and other producers, a group known as OPEC+, “have the capability and flexibility needed to respond to any developments.”
Oman’s oil minister told Reuters on Monday he fully supported Saudi Arabia’s readiness to react to any impact the virus has on the market.
OPEC+, which includes Russia, has been reducing oil supply to support prices and has agreed to hold back 1.7 million barrels per day (bpd) of output until the end of March.
Prince Abdulaziz said all options were open when OPEC+ meets in Vienna in March.
An OPEC source said there were preliminary discussions within OPEC+ for an extension of current oil supply cuts beyond March, and a possible deeper cut was also an option if there was a need, and if the China virus spread impacted oil demand.