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The chief executive of Royal Dutch Shell is preparing for a tough and uncertain energy market, amid heightened fears China’s fast-spreading coronavirus could suppress oil demand growth.
It comes amid speculation that OPEC and allied non-OPEC producers could soon step in to extend production cuts in order to support falling oil prices.
International benchmark Brent crude traded at $58.40 a barrel Thursday morning, down nearly 2.4%, while U.S. West Texas Intermediate (WTI) stood at $52.13, around 2.2% lower.
Oil prices had steadied in recent sessions, after a rout pushed both crude benchmarks to their lowest level since October on Monday.
Brent has now fallen almost 15% since climbing to an early January peak, with WTI more than 17% lower over the same period.
It is a very concerning development, a lot of people will be anxious and of course we are monitoring very closely what is happening, he added. I am absolutely convinced — and that is what we are seeing at the moment — that it will not help sentiment, he warned. At this point in time, sentiment in oil markets is not so much sentiment about supply, it is all sentiment in demand.
Coronavirus vs. SARS
Chinese health officials confirmed there had been 7,711 cases of the deadly pneumonia-like virus at the end of Wednesday, with 170 deaths.
The coronavirus, which was first discovered in the Chinese city of Wuhan, has since spread to other major cities such as Beijing, Shanghai, Macao and Hong Kong.
Multiple cases of the coronavirus have also been confirmed in Thailand, Vietnam, South Korea, Malaysia, Japan, Australia, France and the United States.
Germany, Cambodia, Sri Lanka, India and the Philippines have all recently confirmed their first cases of the virus too.
The World Health Organization’s (WHO) Emergency Committee is set to reconvene on Thursday, with officials poised to decide whether the international spread of the virus constitutes a global health emergency.
Physicians have compared the coronavirus to the 2003 outbreak of SARS, which had a short incubation period of two to seven days. Health experts have told CNBC that the spread of coronavirus is “more infectious” but less severe than the SARS epidemic.
During the period of infection for SARS (2002-2003), there were nearly 8,098 reported cases and 774 deaths, according to WHO. It means the virus killed roughly one in 10 people who were infected.
I think we have to prepare for a tough and uncertain macro. We do that in our company by making sure that our investments are resilient … I think that’s the best way to inoculate ourselves against an uncertain future, Ben van Beurden said.
Shares of Europe’s biggest oil company, which reported a 23% drop in full-year net profit on Thursday, were down more than 3% during mid-morning deals.
(Sources WHO, CNBC)