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Oil Price Forecast Lowered Amid Coronavirus Outbreak

China’s commitment to buy an additional US$52.4 billion in U.S. energy products in 2020/21 9 (on top of the 2017 energy import levels) as part of the Phase 1 trade deal between the two countries could be impossible to achieve

SOUTH DATA — Citigroup has lowered commodity prices forecasts amid coronavirus outbreak amid reports that China’s oil demand has plunged 20% because of the virus lock-down.

“This was all anticipated. Markets had already taken that into account. And that was the reason oil prices were sliding since the outbreak”, says Rashid Husain Syed, Totonto-based energy analyst who contributes to Globe and Mail, Toronto Star, Canadian Energy Research Institute, Dawn and BBC, and wrote for two decades for Saudi Gazette, Arab News.

Syed adds: Chinese industrial output was also going down due to the closing down of cities and evacuation of foreigners from the country. After all China is the global production house. China produces and the world uses. And that is getting hampered due to the virus. This too means less consumption.

According to him, OPEC is aware of it. “There is now a possibility that OPEC may convene a ministerial in February, instead of March as earlier scheduled. Discussions on slashing output further is on. This issue has not cropped up at a good time for the OPEC. Global oil demand outlook is not clear. It is under cloud and will remain so, for some time to come – courtesy the virus.”

One of the largest source of demand and consumption is China.

There is a consensus of opinion that China’s commitment to buy an additional US$52.4 billion in U.S. energy products in 2020/21 ( on top of the 2017 energy import levels) as part of the Phase 1 trade deal between the two countries is impossible to achieve. Will Beijing invoke force majure clause due to the outbreak, if there is one, in the Trump-Xi Trade 1 deal?

South Data (SoData) is a unit of Irshad Salim Associates