Oil plunges as coronavirus threatens to hammer demand and producers clash over cutting output
- Oil prices tumbled to 33-month lows on Friday as coronavirus fears and doubts about production cuts took hold.
- The Organization of Petroleum Exporting Countries halved its growth forecast for global oil demand this year to 480,000 barrels per day, blaming the epidemic.
- Cartel leaders recommended cutting output by 1.5 million bpd for the rest of this year.
- However, OPEC members warned Russia it could scrap the planned cuts if the country doesn't follow suit, Bloomberg reported.
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Oil prices tanked on Friday as fears grew that coronavirus will hammer demand for fuel and producers won't pull the trigger on price cuts.
The Organization of Petroleum Exporting Countries (OPEC) warned on Thursday that it expects global oil demand to increase by 480,000 barrels per day this year - less than half its 1.1 million bpd estimate in December. In response, it recommended cutting output by 1.5 million bpd for the rest of this year.
The coronavirus outbreak has "had a major adverse impact on global economic and oil demand forecasts in 2020, particularly for the first and second quarters," OPEC said in a statement, adding that uncertainty and volatile markets meant "risks are skewed to the downside."
Cartel members want non-OPEC states including Russia to cut production too, and threatened to scrap their planned cuts if Moscow doesn't follow their lead, Bloomberg reported. The prospect of Russia refusing to play ball, and OPEC holding off on output cuts, sparked an oil sell-off on Friday.
The price of Brent crude slumped by more than 4% to below $48 a barrel. West Texas Intermediate dropped by about the same margin to below $44. Both benchmarks touched their lowest levels since the summer of 2017.
