The market is signalling that some near-term demand for oil remains.
The coronavirus outbreak will likely cause global demand for oil to shrink for the first time in more than a decade, the International Energy Agency said Thursday.
OPEC warned the coronavirus outbreak will take a toll on world oil demand in 2020. Crude already sank to a one-year low below $50 a barrel last week and the impact of the epidemic will be felt throughout the year, the agency said.
World fuel consumption - which had previously been expected to grow by 800,000 barrels a day during the three-month period, compared with a year earlier - will instead contract by 435,000 a day, the IEA said in its monthly oil market report.More news: Winter Weather Advisory issued for 3 to 5 inches of snow
"We have cut our 2020 growth forecast by 365 kb/d to 825 kb/d, the lowest since 2011".
With China being a big consumer of oil and the source of most of the growth in oil demand in recent years, the crisis will have a major impact on oil producers. Prices have been plummeting since the beginning of the year, with the Brent and WTI benchmarks trading at $55.15 per barrel and $50.77 per barrel, respectively.
The IEA said that in addition travel to and from China has increased, raising the chance that the disease will spread.
The outbreak has prompted Saudi Arabia, the world's largest oil exporter, to push its allies in the Organization of Petroleum Exporting Countries and beyond to consider an emergency meeting and further production cuts.More news: Death toll in China coronavirus outbreak rises to 1,381
As a result, OPEC lowered its 2020 global gross domestic product growth forecast by 0.1 of a percentage point to 3 percent and said China's 2020 GDP growth will slow by half a percentage point to 5.4 percent.
"Evidently, the timing of the outbreak exacerbated the impact on transportation fuel demand in China, as it coincided with the Chinese Lunar New Year holidays, as millions of Chinese return home to celebrate with family members and friends, or travel overseas", OPEC said.
Overall, OPEC member production fell by 509,000 bpd in January amid supply disruptions in Libya and Iraq.More news: IBM adopts Slack for its 3,50000 employees