China’s oil demand amid the coronavirus outbreak is likely inflicting the worst oil demand shock to markets since the financial crisis of 2008-2009, with Chinese demand plunging by 20 percent compared to the typical demand for the season, sources with inside knowledge of the Chinese industry told Bloomberg.
Due to the extensive travel restrictions and factory activity stalling, this 20-percent plunge in oil demand is equal to around 3 million barrels per day (bpd) and is the most sudden shock to global oil demand since 9/11, according to Bloomberg.
China’s refiners are awash with an oversupply of refined petroleum products—gasoline, diesel, and jet fuel—as the Lunar New Year holiday was extended, economic activity has slowed down, and people are either discouraged or outright banned from traveling long distances by airplanes, cars, buses, or trains.
Oil prices have been battered over the past two weeks after the coronavirus started to claim a growing number of victims, at over 360 as of early on Monday, exceeding the death toll from the 2003 SARS epidemic in mainland China. Since the virus outbreak last month, oil prices have slid around 15 percent, while Chinese markets plunged at opening on Monday, the first trading day after the extended holiday, due to the virus.
The slide in oil prices due to demand concerns over the coronavirus has OPEC and its allies worried what to do next with their production reduction deal expiring in March.
There’s growing speculation that OPEC may move up the meeting scheduled for March 5-6 to February, while sources told Reuters that the OPEC+ technical panel would meet this week and could make a recommendation for how the coalition should proceed with its price-fixing efforts.
Russia is ready to react and doesn’t see any problem meeting with its OPEC allies earlier than planned, Russian Energy Minister Alexander Novak said on Friday, noting that it’s too early to say how hard the virus is hitting oil demand.
By Tsvetana Paraskova for Oilprice.com
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