• 4 minutes Europeans and Americans are beginning to see the results of depending on renewables.
  • 7 minutes Is China Rising or Falling? Has it Enraged the World and Lost its Way? How is their Economy Doing?
  • 13 minutes NordStream2
  • 2 hours Monday 9/13 - "High Natural Gas Prices Today Will Send U.S. Production Soaring Next Year" by Irina Slav
  • 6 hours California to ban gasoline for lawn mowers, chain saws, leaf blowers, off road equipment, etc.
  • 10 hours "Here is The Hidden $150 Trillion Agenda Behind The "Crusade" Against Climate Change" - Zero Hedge re: Bank of America REPORT
  • 2 days An Indian Opinion on What is Going on in China
  • 2 days "A Very Predictable Global Energy Crisis" by Irina Slav --- MUST READ
  • 16 hours Nord Stream - US/German consultations
  • 2 days Can Technology Keep Coal Plants Alive and Well?
  • 3 days Two Good and Plausible Ideas about Saving Water and Redirecting it to Where it is Needed.
  • 3 days Succession Planning in Human Resources for Vaccinated Individuals in the Oil & Gas Industry
  • 5 days Perfect Energy Storm in Europe: turning our back on fossil fuels is easier said than done!
  • 2 days U.S. : Employers Can Buy Retirement Security for $2.64 an Hour
  • 2 days Storage of gas cylinders
Oil Unchanged On Small Crude Inventory Build

Oil Unchanged On Small Crude Inventory Build

Crude prices saw little movement…

How Much Oil Can OPEC Realistically Add?

How Much Oil Can OPEC Realistically Add?

Years of underinvestment and shut…

Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

More Info

Premium Content

Coronavirus May Cripple Fuel Demand In All Of Asia

The coronavirus outbreak in China is already impacting demand for fuel as airlines are canceling thousands of flights to China and Chinese authorities are discouraging travel by air or road in and out of the most-affected regions and have imposed a lockdown on the 11-million-resident city where the virus was first detected.

Demand for jet fuel, gasoline, and diesel is likely to be suppressed in the coming weeks, potentially prompting Chinese and other Asian refiners to cut refinery rates, analysts say.    

The slowdown in China’s fuel consumption is also aggravated by an extended period of public holidays for office workers and multinational corporations—including Google, Apple, McDonalds, and IKEA, to name a few—suspending operations or shutting down offices, stores, and restaurants.

The weaker fuel demand in China is spilling over onto weakening refining margins for processing crude oil into jet fuel, gasoline, and diesel. Therefore, refiners in China—and elsewhere in Asia—are likely to slow down refinery run rates amid depressed demand and an oversupply of fuels, sources who trade, supply, or refine crude oil across Asia told Bloomberg.

If refineries cut throughputs, a secondary victim of the virus outbreak could be crude oil demand in the world’s key oil demand growth driver, Asia.

“Fears of weaker demand have weighed on refinery margins, and continued weakness could see some refineries cut run-rates in China. If we were to see this, it would likely be the independent refiners who are first to cut, given their focus on the domestic market,” ING strategists said on Friday. Related: Jim Cramer: ‘’Fossil Fuels Are Done’’

China has significantly boosted its fuel export quotas for 2020, but those quotas were handed only to large state-owned enterprises, not to small independent refiners.

The first hit comes to demand for refined products in China and across Asia, but a protracted health crisis with more travel restrictions could have a sizeable impact on China’s economic growth, which has already been weakening due to the U.S.-China trade war.  

Weaker growth could spill over to the crude oil demand growth of China—the world’s largest crude oil importer and the main engine of oil demand growth in recent years.  

It may not be an exaggeration to say that when China’s oil demand sneezes, the global oil market catches a cold.

The World Health Organization (WHO) said on Thursday that the outbreak is now a Public Health Emergency of International Concern, but stopped short of advising travel or trade restrictions.

“The Committee does not recommend any travel or trade restriction based on the current information available,” the WHO Emergency Committee said on Thursday, prompting a mini relief rally in oil prices early on Friday.

Yet, overall sentiment in the oil market was decisively bearish for a second consecutive week, despite a massive loss of crude oil supply from Libya.

Analysts are still struggling to quantify the impact of the virus outbreak on the Chinese economy and on oil and fuel demand, and the unknowns are unlikely to clear up over the next few weeks.

According to S&P Global Platts Analytics, oil demand could drop by 200,000 bpd over the next two to three months. This demand erosion would represent around 15 percent of the expected oil demand growth this year. But if the coronavirus turns out to be as deadly as the Sudden Acute Respiratory Syndrome (SARS) was in 2003, then crude oil demand loss could be in the region of 700,000-800,000 bpd—more than 50 percent of the oil demand growth estimate for this year, S&P Global Platts Analytics says.   Related: Is Egypt’s Energy Hub Dream Falling Apart?

As per IHS Markit estimates, the potential maximum economic impact of the coronavirus on China’s economy—based on a benchmark using the SARS economic impact in 2003—could be a 1.1-percentage-point reduction in Chinese economic growth from the baseline IHS Markit forecast of 5.8 percent growth this year.

“Mainland China’s impact on the world economy is also much larger now than during the SARS outbreak, meaning the slowdown in Chinese growth may be a significant drag on global growth,” IHS Markit said this week.

Until clearer indications of the virus impact on oil demand emerge, the market will continue to be weighed down by fears of sizeable demand destruction.

“This thing still in the process of rearing its ugly head and that’s why oil is taking this so hard because this could really turn into an acute drop in demand at least for a time,” John Kilduff, partner at Again Capital LLC, told Reuters this week.  

By Tsvetana Paraskova for Oilprice.com

More Top Reads From Oilprice.com:

Download The Free Oilprice App Today

Back to homepage

Leave a comment
  • Mamdouh Salameh on February 03 2020 said:
    I wouldn’t go as far as to say that the coronavirus may cripple fuel demand in all of Asia before we know how effective are China’s quarantine measures and the time it will take to contain the outbreak.

    Of course, demand for jet fuel, gasoline, and diesel is likely to be slightly reduced in coming weeks, potentially prompting Chinese and other Asian refiners to cut refinery rates. This will affect China’s and global demand for crude oil.

    But if the drop in oil demand is estimated at just 200,000 barrels a day (b/d) over the next two to three months, then the impact on global demand will hardly be noticeable when compared with an estimated glut of 4.0-5.0 million barrels a day (mbd) facing the global oil market resulting from two years of trade war.

    Still, it is inevitable that the hysteria about declining global demand for oil will soon subside given the very strict containment measures that the Chinese government is implementing.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

Leave a comment

EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News