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OPEC Scrambles to React to Falling Oil Demand From China

“People are fearing the worst,” she said.

Chinese oil demand already appears to have crashed as the lockdown of Wuhan and other cities and overall fear curb air travel, driving, trucking and factory use. Gary Ross, chief executive of Black Gold Investors, a New York trading and investment firm, estimates that Chinese oil demand over the last two weeks has been down around 2.5 million barrels a day, or close to 20 percent compared with the previous year.

Mr. Ross said that cutbacks in Chinese oil purchases were likely to ripple across the world, causing supplies to build up in the United States and Europe.

At least for the short term, he said, the oil market has entered “a vicious circle of selling pressure with no hope in sight.”

There is much at stake for the big OPEC producers and Russia, as many of them depend on sales to China, particularly now that the United States has turned from major importer to exporter, largely because of shale production.

In December, before the crisis hit, China imported nearly 11 million barrels of oil, comparable to the output of a major producer like Russia. A little more than half of Chinese supplies come from OPEC countries. Saudi Arabia was China’s largest supplier last year, averaging about 1.7 million barrels a day, or close to a quarter of Saudi exports, according to Energy Aspects. Russia was a close second, with Angola, Brazil and Iraq also feeding large volumes of crude to the Chinese economy.

Analysts say it might not be easy for OPEC to come up with an effective response. For one, it is difficult to predict how long the coronavirus crisis will last and how much damage it will do to the world economy. Also, output curbs on the order of 2.5 million barrels a day would be unusual for OPEC, because such a deep cut would require producers to absorb serious pain. It is also difficult to judge when Libyan volumes, now down about one million barrels a day because of political infighting, will return.

The OPEC countries were already selling oil at relatively low volumes after the December agreement. For instance, OPEC exports for January were down about 700,000 barrels a day from the previous month, according to Kpler, a firm that tracks petroleum exports.

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