Oil prices dropped on Friday after Russia said it backs a recommendation for OPEC and other producers to deepen output cuts amid falling demand for crude as China battles the coronavirus epidemic that has hit global markets.
U.S. West Texas Intermediate (WTI) crude futures were down 74 cents, or 0.5%, at $50.31 a barrel, also heading for a fifth consecutive week of losses.
A panel advising the Organization of Petroleum Exporting Countries (OPEC) and allies led by Russia, known as the OPEC+ group, suggested provisionally cutting output by 600,000 barrels per day (bpd), three sources told Reuters on Thursday.
“We support this idea,” said Sergei Lavrov, Russia’s Foreign Minister, when asked about the proposal at a news conference in Mexico City later in the day.
The OPEC+ group, which pumps more than 40% of the world’s oil, has been withholding supply and agreed to deepen the cuts by 500,000 bpd from the start of this year, to 1.7 million bpd, nearly 2% of global demand.
“While there is no firm view on the outbreak’s impact on oil demand, OPEC is most likely focused on the status-quo short-term crisis rather than a prolonged one,” Eurasia group said, estimating a Chinese demand contraction of as much 3 million bpd in the first quarter from 2019 levels.
Oil prices have fallen by more than a fifth since the outbreak of the virus in the city of Wuhan in China.
Chinese President Xi Jinping declared a “people’s war” on the epidemic as China’s Hubei province, where Wuhan is located, reported 69 new deaths, taking the total in the country to more than 600.
“The impact of the coronavirus on the oil market remains largely a Chinese demand story with weakening jet fuel demand and economic run cuts, but demand destruction outside of China has been minimal, for now,” RBC Capital Markets analysts said in a note.