Shares of several oil and gas companies were trading lower Monday after reports emerged that Saudi Arabia is pushing for a short-term oil production cut in response to the impact of China’s coronavirus, which is impacting crude demand, The Wall Street Journal reported, citing OPEC officials.
Brent crude futures were trading down 2% at $54.48 per barrel.
Caroline Bain, chief commodities economist at Capital Economics, reports that commodity prices lost ground last week, as the rapid spread of the Wuhan coronavirus dented China’s near-term growth prospects.
Oil and base metals prices fell 10% from their respective January peaks.
“While it is impossible to predict when the virus will be brought under control, it clearly poses a downside risk to our expectation of a pick-up in demand for industrial commodities later this year,” Bain said in a note.
“Given the degree of uncertainty involved, we are not changing our end-year forecasts for now.Admittedly, it seems almost certain that the coronavirus will curb Chinese economic growth and commodities demand this quarter. That said, our best bet remains that prices will pick-up later this year, as global economic growth slowly begins to gather pace."
According to the Wall Street Journal, OPEC is split over how to manage oil supply in the face of the deadly coronavirus, which has already eroded demand in China.