There are palpable fears among oil producing countries on account of the rampaging coronavirus as it feared among OPEC and Non OPEC members that the price of crude oil might crash to $30 per a barrel in the nearest future.
If this happens it would create a significant impact on the Nigerian economy which is solely dependent on crude oil for her revenue and foreign earnings. Unemployment may increase as government may even begin to sack workers while our foreign reserves may be depleted the naira would be badly hit.
It is an attempt to forestall the free fall of the price of crude oil that the members of OPEC and Non OPEC members are meeting this week on the all-important agenda of oil production cut.
This week ministers from the oil producing countries of OPEC and their allies would be meeting to decide on the future of their latest round of output cuts. This is after OPEC have failed to persuade Russia to bring the meeting forward. It is however believed that, Saudi Arabia will be able to convince its biggest non-OPEC ally of the need to make deeper cuts in the face of a demand slump triggered by the Covid-19 virus.
The looming pandemic has already made its mark on oil markets. U.S. West Texas Intermediate crude is now firmly below $50 a barrel and global benchmark Brent briefly followed it. That is uncomfortable territory for producers everywhere and, without a clear indication of deeper output cuts from this week’s meetings, prices will fall further.
As the virus spreads, locking down Italy’s industrial heartland and prompting Switzerland to ban large gatherings, producers appear to be clinging to overly optimistic demand assessments.
OPEC Secretary General Mohammad Barkindo, speaking at a conference in Saudi Arabia last week, said that in spite of the new coronavirus, the world’s “thirst for energy will continue to grow.” While that may be true for energy as a whole, it may not be for oil demand this year if there isn’t a quick rebound.
Assessments from the three main forecasting agencies still show 2020 oil demand growth running close to a million barrels a day, but that now looks very optimistic. By contrast, veteran energy consultants FGE cut their forecast for growth this year to “almost zero.”
They base their pessimism on the ripple effects of the virus beyond China, where traffic volumes in affected cities have already slumped, according to data from the TomTom Traffic Index. Measured in terms of how much longer journeys take than they would on empty roads, live data show that traffic volumes in Beijing are still well below normal levels, even as the city is reportedly returning to work.
In Wuhan, center of the epidemic in China, there is no such uptick; economic activity remains severely curtailed.
But this is no longer just a Chinese problem. The economic impact of the spread of the virus to other parts of the world is clear. Four-week average jet fuel demand in the U.S. has dropped by 18percent in the past 10 weeks. Airlines are cutting flight schedules and passenger numbers have collapsed.
This is the situation that will face the oil ministers of the 23 nations in OPEC+ later this week. They need a credible plan that will take actual barrels off the market.
