SINGAPORE/LONDON (Reuters) - A fast-spreading coronavirus in China has sent shockwaves through global commodity markets, prompting OPEC and its allies to consider deepening crude supply curbs and Asia’s largest oil refiner to slash over a tenth of its output.
The new virus has already killed 361 people in China and spread to over around two dozen other countries.
The number of confirmed cases in China has risen above 17,000 with at least another 151 confirmed cases in other countries and regions.
The Organization of the Petroleum Exporting Countries and its allies are in discussion to bring forward a policy meeting to this month from March, and to consider deepening oil supply curbs by an additional 500,000 barrels per day to 2.2 million bpd.
OPEC member Iran said the spread of the virus had hit oil demand and called for an effort to stabilize prices, Iran’s official news agency IRNA reported.
China is the second-largest oil refiner and a critical growth engine for the global economy, so any material contraction in Chinese economic activity is expected to have far-reaching repercussions across several industries.
China’s Sinopec Corp, Asia’s largest refiner, is cutting throughput this month by 600,000 bpd, around 12%, its steepest cut in over a decade, in response to slowing oil demand.
Sinopec’s trading arm Unipec has suspended purchases of West African crude and is looking to re-sell at least five of its March-loading Angolan cargoes.
Analysts predict China’s oil demand could fall by 250,000 bpd in the first quarter of 2020 with jet fuel taking the hardest hit as international airlines shun the country due to the virus.
Jet fuel prices and production margins in Asia posted their biggest monthly decline in more than a decade in January, hurting refiners and fuel exporters.
Dozens of international carriers have already fully or partly suspended flights to China, one of the world’s fastest-growing aviation markets.
Freight rates for supertankers on the Mideast Gulf and U.S. Gulf routes to Asia have fallen to their lowest since mid-September.
Oil prices have fallen to their lowest since last January, dragged down by concerns about demand in China - the world’s top oil importer.
Palm oil prices steadied on Monday after two straight sessions of losses, but brokers and traders told Reuters prices could fall below 2,500 ringgit over coming weeks if the spread of the coronavirus continues to disrupt travel and normal activity in the world’s second-largest palm oil importer.
Palm oil is used mainly in food courts and by catering companies in China, the second-largest palm importer behind India, so reduced consumption is expected over the near to medium term.
(Graphic: Commodities prices under pressure as China grapples with the coronavirus,here
Base metals have also taken a hit as Chinese manufacturing plants and factories take protracted Lunar New Year breaks while they assess the fallout from the virus. Japan’s Toyota Motor Corp and other firms announced extended plant shutdowns in China.
Shanghai copper prices dived to a three-year low on Monday as Chinese markets reopened, giving investors the first opportunity since Jan. 23 to react to the outbreak.
Other Shanghai-traded industrial metals also tumbled, following big price falls on the London Metal Exchange (LME) that took place while Chinese markets were closed.
Writing by Gavin Maguire and Ahmad Ghaddar; editing by Veronica Brown and Susan Fenton