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By Devika Krishna Kumar
NEW YORK, March 2 (Reuters) - Colombia’s state-run oil company Ecopetrol SA placed restrictions on business travel to all Asian and European countries on Monday in response to the coronavirus outbreak, its chief executive told Reuters.
The company is closely monitoring the effects of the virus on crude demand, Chief Executive Felipe Bayon said in an interview with Reuters in New York, and added China has not cut back purchases of its crude yet.
Oil prices have slumped more than 20% this year to multi-year lows as the coronavirus threatens to erode global crude demand.
The outbreak of the virus has already killed more than 3,000 people and roiled global financial markets. World Health Organization (WHO) chief Tedros Adhanom Ghebreyesus said almost eight times as many cases had been reported outside China as inside in the previous 24 hours, adding the risk of coronavirus spreading was now very high at a global level.
About 46% of Ecopetrol’s crude exports were shipped to Asia in 2019, Bayon said, the majority of that sold to China. In the fourth quarter, shipments to Asia represented about 54% of exports.
“The Chinese refineries see us as part of the base load which is good. So we haven’t seen an impact in terms of volumes,” Bayon said. “We have a combinations of terms. We have long-term contracts with some of the refineries and we have spot shipments as well.”
Ecopetrol produces a majority of Colombia’s oil. The country’s daily production averaged 885,851 bpd in 2019, and the government has said it expects crude output to rise to between 890,000 and 900,000 bpd this year.
Steps the company can take if prices continue to slide and China cuts back purchases include potentially increasing crude processing at its domestic refineries and shipping crude to alternative destinations such as the United States, Bayon said.
Ecopetrol could also postpone or stop some investments that are discretionary and will not affect growth, he said.
“God forbid that prices drop to $30 or $40 a barrel, we need to be ready to pull those levers and we are ready,” he said.
Oil prices rose more than 4% on Monday, the first gain after six sessions of losses. Brent crude futures gained $2.23, or 4.5%, to settle at $51.90 a barrel. The session low of $48.40 was its lowest since July 2017.
“I was expecting prices to drop today. It’s a bit crazy,” Bayon said.
Break-even prices for the company are currently at about $29 a barrel, allowing the company some flexibility, Bayon said. (Reporting by Devika Krishna Kumar in New York Editing by Chris Reese and Sonya Hepinstall)