Factbox: OPEC experts weigh coronavirus impact and oil cuts

OPEC and its coalition partners are discussing deeper cuts to oil output in the wake of the global coronavirus outbreak and slowing Chinese demand.

The technical committee of the 23-member grouping, known as OPEC+, is meeting in Vienna on February 4-5 to weigh the impact from the virus on oil markets and the need for a response. Delegates are also expected to discuss whether to bring forward a ministerial meeting currently scheduled for March 5-6, according to OPEC sources.

The following are key facts OPEC+ must consider in response to the emerging global health crisis and its impact on growth.

TRADE FLOWS

China -- the world's second-largest economy -- is the main driver for OPEC crude demand. Slowing economic growth caused by the virus is expected to hit demand hard.

**China buys more than 70% of its crude from OPEC and its allies, making demand destruction caused by the spread of the virus critical for the group.

**The country imported 10.16 million b/d of crude in 2019, up 9.5% year on year, data from General Administration of Customs showed.

**The International Energy Agency estimates Chinese jet/kerosene 2019 demand at 858,000 b/d, up 5.7% on the year.

The OPEC+ response to the virus hangs in the balance after days of bilateral talks between kingpins Saudi Arabia and Russia.

**The Joint Technical Committee is co-chaired by delegates from Saudi Arabia and non-OPEC Russia. It is typically tasked with reviewing compliance with the coalition's production quotas and analyzing market conditions.

**OPEC+ started cutting 1.7 million b/d from January 1, up from a 1.2 million b/d reduction last year. The new deal runs to the end of March.

**The group may decide to slash output by up to 1 million b/d extra to halt a steep slide in prices.

Analysts and industry experts are weighing the impact on oil demand from a rapid slowdown in China's growth.

**S&P Global Platts Analytics expects a writedown of oil demand growth of around 970,000 b/d in the first quarter and 380,000 b/d in Q2. On an annual basis, demand growth would be cut by 290,000 b/d, although it could be less than that if demand bounces back in the second half.

**BP's chief financial officer Brian Gilvery said Tuesday the outbreak could reduce global oil demand by up to 500,000 b/d in early 2020.

**In a worst-case scenario involving travel curtailments, demand could drop by up 2.6 million b/d in February and 2 million b/d in March, Platts Analytics has warned.

PRICES

Oil prices trading below $56/b are significantly below the fiscal breakeven required to balance the budgets of OPEC's core Gulf Arab producers.

**ICE Brent crude has plunged around 20% since the fears rattled the oil market to a one-year low of $53.95/b in early morning London trade Tuesday, while NYMEX March WTI briefly fell below $50/b, before recovering.

**Middle Eastern and West African crudes along with Russian ESPO Blend are likely to bear the brunt of China's economic slowdown.

Jet fuel markets hit hard as airlines cut services.

**The FOB Singapore jet fuel/kerosene crack against front-month cash Dubai crude plunged to $8.22/b Friday, marking a four-and-a-half year low since August 6, 2015, before rebounding to $9.47/b on Monday, Platts data shows.

**The April/May ICE Brent spread traded at a negative $0.18/b Monday versus a backwardation of $0.60/b last week, Platts Analytics noted. "This is a very serious shift in the forward curve, now pricing in substantial concerns about oil demand destruction and consequently steep crude run cuts in China," Platts Analytics added.

INFRASTRUCTURE

The majority of physical disruption has so far come from the closure of factories in China and global airlines suspending services.

**Japanese airlines joined other global carriers Tuesday reducing flights to China. ANA's flights to China will drop by 13% to 288 flights a week from 330 before the outbreak.

**The International Air Transport Association said Friday that the growth of the Chinese air transport market over recent years had added an additional 450 million passengers flying to, from and within China per year compared with a decade ago.

**Russia closed its 4,000 km-long land border with the Asian country, while Macau has asked its casinos to temporarily halt operations in the world's biggest gambling hub to help contain the epidemic.

Refiners in China are poised to cut both crude imports and throughput as the outbreak reduces consumption, with transportation, manufacturing and industrial activities all slowing down.

**Independent refiners in Shandong province have also reduced their average run rate by more than 17 percentage points from mid-January, according to sources.

**Sinopec -- the world's biggest refiner by capacity -- is expected to cut spot crude purchases as domestic oil demand has drastically dropped. This is likely to have a broad impact on a number of global crudes.

**China and Japan have increased their Middle East crude imports in recent years. Asian refiners are set up to take heavier sourer crudes, which dominate OPEC's supply.

OPEC's response is complicated by geopolitics and the different economic needs of its members. Saudi Arabia is producing well below its quota but Iraq and Nigeria are lagging. Russia is pumping near capacity.

**OPEC pumped 29.66 million b/d in 2019, according to survey data. This was the lowest annual average since 2011.

**Production is poised to fall sharply after civil unrest in Libya has cut almost 1 million b/d of light sweet crude, since mid-January.

**Saudi Arabia trimmed its production in December to 9.82 million b/d, according to the Platts OPEC survey.

**Russia 's total crude and condensate production climbed to around 11.28 million b/d in January, up from 11.25 million b/d in December, according to official data.

Saudi Arabia has struggled to gain Russia's support, with the kingdom's ruler forced to reach out personally to President Vladimir Putin.

**Russia had already pledged to cut an additional 70,000 b/d from its October 2018 output of 11.42 million b/d, or a total of 300,000 b/d under the current agreement.

**Russia's quota is now 10.328 million b/d, based on figures Russian energy minister Alexander Novak provided, with its condensate production now exempted from its cap.