The near-term impact of the coronavirus outbreak on oil demand remains uncertain as much depends upon when and how China’s manufacturing industry restarts after the currently extended Lunar New Year public holiday.
Wood Mackenzie has lowered its oil demand forecast for the first quarter of 2020 by nearly 900,000 barrels per day (b/d) to 98.8 million b/d. Much of the drop is attributable to efforts to contain the outbreak, including flight cancelations.
Ann-Louise Hittle, Vice President, Macro Oils, said, “The Q1 2020 fall in Chinese demand – a 200,000 b/d drop to 13 million b/d - is the first year-on-year decline in the country’s demand since 2009.
“OPEC is holding emergency talks to consider an additional 500,000 b/d cut, on top of its already agreed steep output quotas in a bid to balance the market and shore up crude prices.
“It’s a dilemma for the group because the duration of the hit to oil demand – particularly from China, the world’s largest oil importer - is not clear.
“Yet, without a further production cut, crude oil prices will remain under pressure and struggle to hold the mid-$50 per barrel price for Brent, let alone recover to above $60 per barrel before Q2 2020.”
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