Dubai — OPEC members are considering deeper production cuts, or extending their existing deal, in response to a slump in prices caused by the outbreak of coronavirus in China, according to a source in the group.
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"The next two weeks are very critical for not only the oil market but the global economy," the OPEC source said on Monday, speaking on condition of anonymity. "There is right now discussion among the ministers of OPEC+ of watching the market closely and preparing to do anything if there is a need for it."
The remarks followed a statement on Monday from Saudi Arabia's oil minister, Prince Abdulaziz bin Salman, aimed at calming the market after Brent crude dropped almost 3.5% to below $58/b amid fears of a wider economic impact of the virus, which has killed over 80 people in China and shut down the country.
The kingdom has "the capability and flexibility needed to respond to any developments, by taking the necessary actions to support oil market stability, if the situation so requires," Prince Abdulaziz said in a statement carried by the Saudi Press Agency.
According to Prince Abdulaziz, the kingdom "is closely monitoring the developments in the global oil market resulting from the gloomy expectations about the impact of the coronavirus outbreak on the Chinese and the global economy and oil market fundamentals."
He added that the impact on global markets, including oil and other commodities, is driven by "psychological factors and extremely negative expectations adopted by some market participants despite its very limited impact on global oil demand."
China -- the world's second-largest economy -- imported 10.16 million b/d of crude in 2019, according to official data. Chinese authorities have continued to lock down cities to contain the virus, which has spread and reached countries including the US and Canada.
"For now we have put China's demand outlook under negative watch, which means we will almost certainly adjust it down in the coming weeks," said S&P Global Platts Analytics in a research note published last Thursday.
The OPEC-led alliance of oil producers, dubbed OPEC+, is currently in the midst of trimming 1.7 million b/d of oil from the market through to the end of March to help soak up excess supply. Saudi Arabia will keep its crude production at 9.744 million b/d in January and February, in line with its promise to produce 400,000 b/d below its official OPEC+ quota during the first quarter, the minister said earlier this month.
The UAE -- OPEC's third-largest oil producer -- also urged caution with regards to the projected impact on global oil demand from the virus.
"It is important that we do not exaggerate projections related to future decreases in oil demand due to events in China, and the market does not over-react based on psychological factors, driven by some traders in the market," the UAE energy minister Suhail al-Mazrouei said in a statement on Monday.
"The next OPEC ministerial meetings will be in March of this year. During these meetings, OPEC and OPEC+ member countries will discuss market conditions and, if required, all options to ensure continued market balance," said Mazrouei in the statement.
OPEC+ members will next meet in Vienna March 5-6 to discuss policy and output levels.
"We are confident that all member countries will continue to make wise decisions that preserve the excellent work of recent years to bring supply and demand into balance," the minister said. "This is supported by the capabilities and flexibility all member countries have to respond to market conditions."
OPEC countries' spare oil capacity ranges between 3-3.5 million b/d, with two-thirds of that production in the Persian Gulf, led by Saudi Arabia, the organization's secretary general, Mohammad Barkindo, said last month.
Separately, the UAE's compliance with OPEC cuts in December exceeded 100%, according to the energy minister's statement.
OPEC pared its crude oil production by 100,000 b/d in December, according to the latest S&P Global Platts OPEC survey, putting the bloc under its new, more-stringent quotas a month early.
The 10 members with quotas under the accord, which exempts Iran, Libya, and Venezuela, produced 25.06 million b/d in December, making good on their new collective ceiling of 25.15 million b/d.