London (CNN Business)Oil producers are facing the biggest drop
in demand for their product ever as the coronavirus spreads
around the world, forcing OPEC and its allies to consider
Research firm IHS Markit said Wednesday that oil demand will
suffer its steepest decline on record in the first quarter —
worse even than during the 2008 global financial crisis — as
schools and offices close, airlines cancel flights worldwide and
a growing number of people hunker down at home.
Most of the reduction in demand can be traced to China, where
the coronavirus has caused what IHS Markit describes as an
"unprecedented stoppage" of economic activity.
But reduced consumption will be widespread, and IHS Markit
expects global demand to drop by 3.8 million barrels per day in
the first quarter compared to 2019. Demand in the first three
months of 2019 was 99.8 million barrels per day.
"This is a sudden, instant demand shock — and the scale of the
decline is unprecedented," said Jim Burkhard, vice president and
head of oil markets at IHS Markit.
The warning comes ahead of a critical meeting Thursday for OPEC
members and allied producers in Vienna. The cartel, is under
pressure to announce yet another round of coordinated production
cuts, its preferred method of propping up prices.
Coronavirus fears have already driven oil into a bear market,
with Brent crude futures, the global benchmark, trading at
$52.65 per barrel, more than 23% below their recent peak in
early January. US oil is trading at $48.22, nearly 24% below