UAE and Saudi Arabia caution oil market over coronavirus gloom

The United Arab Emirates and Saudi Arabia have cautioned on Monday against “gloomy expectations” regarding the possible impact of the spread of the coronavirus on the global economy and oil demand.

The death toll from the coronavirus outbreak in China rose to 81 with more than 2,700 infected, while health authorities around the world stepped up screening of passengers from China.

But Saudi Energy Minister Prince Abdulaziz Bin Salman said the impact being seen on oil and other markets was “primarily driven by psychological factors and extremely negative expectations adopted by some market participants despite its very limited impact on global oil demand.

“Such extreme pessimism occurred back in 2003 during the SARS outbreak, though it did not cause a significant reduction in oil demand,” the minister said in a statement.

The Saudi minister also said Opec and its allies could respond to any impact on the oil market, adding he was confident China and international authorities could contain the virus.

Fellow Gulf Opec oil producer United Arab Emirates echoed the Saudi minister’s comments.

Suhail Bin Mohammed Faraj Faris Al Mazrouei, Minister of Energy and Industry, has stressed that the impact on global markets, including the oil market, from the spread of the coronavirus is driven by psychological factors affecting certain traders in the market.

In a statement, Al Mazrouei said, “It is logical for us not to inflate any prospects for a decline in demand as a result of what is happening in China, as the UAE is following with interest the efforts of the Chinese Government to contain the outbreak of the Coronavirus.” He expressed the UAE’s confidence in the ability of China and the international community to control and eliminate the virus completely.

The minister also noted that the member states of Opec plus will discuss all options to achieve a market balance during the next ministerial meeting, to be held next March.

The UAE Minister of Energy and Industry noted that he is optimistic that all members of OPEC plus will make wise decisions that preserve gains thanks to their ability and flexibility to form a suitable response.

Al Mazrouei pointed out that the UAE plays a key role in achieving stability and balance in global markets, having met its commitment to reduce production last December by more than 100 per cent.

Prince Abdulaziz said he was confident the Organization of the Petroleum Exporting Countries (Opec) and other producers, a group known as Opec+, “have the capability and flexibility needed to respond to any developments.” Oman’s oil minister told Reuters on Monday he fully supported Saudi Arabia’s readiness to react to any impact the virus has on the market.

Opec+, which includes Russia, has been reducing oil supply to support prices and has agreed to hold back 1.7 million barrels per day (bpd) of output until the end of March.

Prince Abdulaziz said all options were open when Opec+ meets in Vienna in March.

Opec President Mohamed Arkab said on Monday he expects an outbreak of the coronavirus in China to have little impact on the global oil market for now, but added that producers were ready to react to any new developments.

“The impact on the prospects for the world oil demand would be low,” Arkab, who is also Algeria’s energy minister, said in a statement carried on the country’s state news agency APS.

“The organisation (OPEC) is closely monitoring the development of the oil market in conjunction with the development of the recent coronavirus epidemic.”

Meanwhile, crude prices dropped below $60 for the first time in nearly three months on Monday, as the death toll from China’s coronavirus rose and more businesses were forced to shut down, fuelling expectations of slowing oil demand.

Brent crude was down $1.40 a barrel at $59.29 at 1406 GMT, its lowest since late October and the biggest intra-day fall since Jan. 8.

US crude was down $1.05 at $53.14 a barrel. Both contracts had earlier fallen by more than 3%.

Global stock exchanges also fell as investors grew increasingly anxious about the widening crisis. Demand spiked for safe-haven assets, such as the Japanese yen and Treasury notes.

Agencies