Coronavirus to drag oil below US$60 this year, weighing on Gulf exporters

RIYADH: The coronavirus outbreak may curb demand for oil in China and other Asian countries, depressing oil prices further to as low as US$57 a barrel and clouding growth prospects across the Middle East, the Institute of International Finance (IIF) said.

“Before the coronavirus, we were assuming that oil prices would average US$60 a barrel this year, compared to US$64 last year,” said Garbis Iradian, chief economist for the Middle East and North Africa (Mena) at the finance industry body.

“Most likely we’ll revise our forecast for the whole year, it could be US$58 or US$57 depending on developments of coronavirus.”

His comments underscored growing concerns about the economic impact of the virus that will dominate the meetings of finance officials from the world’s 20 largest economies this weekend in Riyadh.

Iradian said the virus outbreak could depress China’s growth by 0.5 to 0.7%. That would have a dramatic impact on crude prices, which on Friday fell to US$57.75 a barrel by 1442 GMT, as a rise in new cases fuelled economic uncertainty.

“If the growth rate (for China) is 5% then it has major implications for oil. The Chinese demand for oil could drop by around 400,000 barrels a day, and other Asian countries could lower their demand.

Overall the increase in global demand for oil, instead of being 900,000 barrels per day … could be 300,000 to 400,000,” he said.

This may impact economic growth in the Middle East, though a direct impact on regional economies, particularly for oil exporters, has so far been contained, he said.

A draft communique prepared for the G20 meeting on Feb 22-23 said financial leaders of the world’s largest economies expect a modest pick up in global growth in 2020 and 2021 due to a continuation of “accommodative” financial conditions and signs of easing trade tensions.

But it said the coronavirus outbreak, which has killed more than 2,000 people and crippled the Chinese economy through drastic curbs on travel and commerce, posed a downside risk to the economic outlook.