Saudi Arabia is closely monitoring developments in global oil markets resulting from "gloomy expectations" regarding the possible impact of the coronavirus on the Chinese and global economy, as well as on the oil market's fundamentals, its energy minister said on January 27.
OPEC and its allies can respond to any impact on the stability of the oil market if needed, Prince Abdulaziz bin Salman said, but added that he was confident the Chinese government and international community could contain the spread of the virus and fully eradicate it.
The minister said the current impact on global markets, including oil and other commodities, was "primarily driven by psychological factors and extremely negative expectations adopted by some market participants despite its very limited impact on global oil demand."
Crude prices fell more than 2 percent to multi-month lows on January 27 as the rising number of cases of the coronavirus in China and city lockdowns there deepened concerns over oil demand.
Brent crude fell by $1.36 a barrel, or 2.2 percent, to $59.33 by 0425 GMT, having earlier dropped to $58.68, its lowest since late October.
US crude was down by $1.30, or 2.4 percent, to $52.89, having earlier eased to $52.15, its lowest since early October.
While most markets are being impacted by the spread of the coronavirus, many are closed in Asia due to Lunar New Year holidays.
"Such extreme pessimism occurred back in 2003 during the SARS outbreak, though it did not cause a significant reduction in oil demand," Prince Abdulaziz said in a statement.
He said he was confident the kingdom and other members of the Organization of the Petroleum Exporting Countries (OPEC), along with other producers in a group known as OPEC+, "have the capability and flexibility needed to respond to any developments, by taking the necessary actions to support oil market stability, if the situation so requires."
Oman's oil minister told Reuters on January 27 that he fully supported Saudi Arabia's readiness to react to any impact the new coronavirus could have on the market. Oman is a member of the OPEC+ group.
OPEC+, which includes Russia, has been reducing oil supply to support prices. It has deepened its agreed output cuts by 500,000 barrels per day (bpd) to 1.7 million bpd through March. The group meets in March to decide on its output policy.
Prince Abdulaziz said on Friday the aim of OPEC+ was to cut seasonal inventory builds that typically occur in the first half of the year.
All options were open when OPEC+ meets in Vienna in March, he said, adding that it was too early to make a call on the need for more cuts.
Health authorities around the world are racing to prevent a pandemic after more than 2,000 people were infected with the virus in China and 80 died.
The virus has created alarm because much about it is still unknown, such as how dangerous it is and how easily it spreads between people. It can cause pneumonia, which has been deadly in some cases.