OPEC may deepen production cuts as global oil demand at risk

The Organization of the Petroleum Exporting Countries (OPEC) and its allies could reportedly cut their oil output by a further 500,000 barrels per day (bpd) due to the impact on oil demand from the deadly coronavirus.

Sources told CNBC that the cartel considers holding a ministerial meeting on February 14-15, almost a month earlier than scheduled.

"I think it is a 'go big or go home' moment for the organization," said Helima Croft, global head of commodity strategy at RBC Capital Markets.

"If you are going the route of an extraordinary meeting, you will have to come up with a substantial reduction in order to prevent the market from further tanking," she said, adding that OPEC may potentially cut production in the "1 million (barrel) plus range" this month.

Oil has fallen $10 a barrel this year to $56, lower than the level many OPEC countries need to balance their budgets. Benchmark Brent crude was trading 1.3 percent lower on Monday at $55.84 a barrel. It is now at its lowest level since January 2019.

US West Texas Intermediate was down almost one percent trading at $51.17 a barrel. It has fallen more than 15 percent since the start of the year.

Analysts and traders project the coronavirus outbreak in China could cut oil demand by more than 250,000 bpd in the first quarter.

OPEC member Iran said the spread of coronavirus had hit oil demand. "The oil market is under pressure and prices have dropped to under $60 a barrel and efforts must be made to balance it," said Iran's oil minister, Bijan Zanganeh.

OPEC and other major oil producers, referred to as OPEC+, have been reducing oil supply to support prices. They agreed in December to cut output by 1.7 million bpd until the end of March. The next meeting was scheduled for March 5-6. Russia, which is the biggest non-OPEC producer, said on Friday it was ready to bring forward the OPEC+ meetings to February.

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