Sales of jet fuel in China slumped by a quarter in the last week of January because of the coronavirus outbreak, an unnamed source from the oil industry told Reuters.
The virus had a severe impact on the travel industry, and air travel specifically, but the impact on total January sales of jet fuel was surprisingly moderate: total jet fuel sales for the full month of January were only down by 0.2 percent from a year earlier, the source said.
However, as the outbreak continues spreading, its effect on travel is bound to become more palpable. The number of people infected with the coronavirus has topped 24,000, with 492 confirmed deaths from it, according to CBS. Several countries, among them the United States, Italy, Australia, Russia, and Japan, have imposed strict travel restrictions to people coming from China, and more may follow.
It was this impact on the travel industry that sparked the ten-day-long losing streak in oil prices that may continue, after prices took a breather today when scientists in Wuhan said they may have an effective treatment for the virus. Related: Bear Run Sends Oil Down For 10th Straight Session
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. This has led to thousands of cancelled flights and consequently much lower fuel demand just as Chinese refiners got their first batch of 2020 fuel export quotas. But they may be in for more pain.
“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 last Friday.
Yet China will not suffer alone: the demand drop will spread to other Asian countries as well, compromising the continent’s status as the main driver of oil demand. In fact, expectations of weaker economic growth in China as a whole, as a result of the outbreak, has had analysts warning that the oil demand consequences from the outbreak could last for quite a while.
By Irina Slav for Oilprice.com
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