OPEC+ Meeting Today To Assess Impact On Global Oil Demand

The Energy Report

The Energy Report


The Phil Flynn Energy Report 

No Pandemic Yet 


The World Health Organization (WHO) says that there is no pandemic when it comes to the coronavirus. There may be no pandemic in global stock markets as well. Stocks are soaring back and oil is finding support on a Bloomberg report of a phone call between Russian President Vladimir Putin and Saudi King Salman bin Abdulaziz discussed the global energy market on Monday evening. The Kremlin said in a statement, both leaders confirmed, “readiness to continue cooperation within OPEC+,” it said. The kingdom also endorsed the call according to Bloomberg raising expectations that those two co-conspirators are getting ready to shock and awe the oil market.


There is a Reuters report that Russian Energy Minister Alexander Novak said on Tuesday that he could not say for sure if it were time to tighten oil output curbs amid an outbreak of a new coronavirus and slump in oil prices. Three OPEC+ sources and an industry source familiar with the discussions told Reuters on Monday that OPEC+ were considering cutting their oil output by a further 500,000 barrels per day (bpd) due to the impact on oil demand from the coronavirus. "I can't tell you about concrete proposals... It is important now to evaluate the situation and evaluate the right forecasts. There are lots of uncertainties, maybe those are panic attacks," Novak told reporters.


Iran is also on board. Reuters is reporting that Iranian Oil Minister Bijan Zanganeh said on Monday that, "the spread of China’s new coronavirus had hit oil demand and called for an effort to stabilize oil prices", Iran’s official news agency IRNA reported.


Reuters is reporting that “An OPEC+ technical committee meeting on Tuesday to assess the impact on global oil demand and economic growth of the outbreak of the coronavirus has invited China’s envoy to the United Nations in Vienna to attend, OPEC+ sources told Reuters. Wang Qun will address the Joint Technical Committee (JTC), which is tasked with advising the Organization of the Petroleum Exporting Countries and its allies led by Russia, known as OPEC+, on market fundamentals. The JTC is holding an extraordinary meeting at 1200 GMT in Vienna to study different scenarios for whether deeper cuts or an extension to a current output reduction deal is needed, sources said. It will continue meeting on Wednesday and take the outbreak of the SARS virus as an example to assess the potential impact of the coronavirus on demand, and OPEC+ source said.


Add to that, massive Chinese stimulus and a better than expected U.S. Manufacturing number is setting the stage for the post coronavirus economic bump.


The hit to demand is historically substantial, it is a far cry from the 3 million barrels a day that was predicted by one source. Reuters is reporting a more modest number and more in line with my expectations. Reuters wrote, “The global economic slowdown in the wake of China’s coronavirus outbreak is set to reduce global oil demand in 2020 by up to 0.5%, BP’s Chief Financial Officer Brian Gilvary said on Tuesday. The drop-in industrial activity and flight cancellations have so far hit oil demand by around 200,000 to 300,000 barrels per day (bpd), Gilvary told Reuters, after BP (BP.L) reported its fourth-quarter results. For the whole year, the slowdown will reduce consumption by 300,000 to 500,000 bpd, roughly 0.5% of global demand, according to Gilvary. The impact in China has been more pronounced, reducing demand by around 1 million bpd, he added.


It also possible that a vaccine for the Coronavirus might be right around the corner. Bloomberg News reported that, “Remdesivir, a new antiviral drug by Gilead Sciences Inc. aimed at infectious diseases such Ebola and SARS, will be tested by a medical team from Beijing-based China-Japan Friendship Hospital for efficacy in treating the deadly new strain of coronavirus, a hospital spokeswoman told Bloomberg News Monday.”


The Washington Examiner reports that roughly, “10 pharmaceutical companies have coronavirus treatments or vaccine projects in the works, including Johnson & Johnson and Inovio Pharmaceuticals. Still, it may take months before the drugs are approved.


It might be time to start looking at a seasonal bottom in RBOB. U.S. demand should soar. We get the API today.

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About the Author

Senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor.