Falling Chinese demand for crude oil and fuels amid the coronavirus outbreak will likely cut shipping rates globally, ship brokers and owners told S&P Global Platts on Wednesday as the death toll from the virus continues to grow and OPEC+ entered a second day of damage control with an emergency meeting.
The outlook for crude oil and refined products demand does not look good right now, a tanker broker in Dubai told S&P Global Platts.
Charter rates for supertankers on key shipping routes from the United States and the Middle East to Asia have already dipped to their lowest levels since the middle of September, because the coronavirus outbreak has started to eat into oil demand in the world's top oil importer, China, ship brokers told Reuters earlier this week.
Demand for jet fuel, gasoline, and diesel is likely to be suppressed in the coming weeks as airlines are canceling thousands of flights to and from China, and Chinese authorities are discouraging or outright banning travel in the areas most affected by the virus.
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 and refiners are cutting refinery runs amid weak fuel demand.
In addition, oil traders are scrambling to find spot buyers for crude oil outside China, but overall demand in wider Asia isn't great either, because of weakening refining margins.
Related: Traders Scramble To Find Oil Buyers Amid Falling Chinese Demand
If demand continues to be depressed for months, tanker rates on the key oil shipping lanes in the world would dip, affecting the revenues of shipping firms.
"The impact on Chinese domestic oil products consumption will depend on how quickly transportation and industrial activities will return to normal levels. Demand for imported oil could take even longer to recover, as refineries, which were facing a capacity surplus before the outbreak, will need to absorb excess inventories," Fitch Ratings said earlier this week. The virus outbreak could aggravate an already expected surplus on the oil market this year, especially in the first half, "potentially leading to more short-term pressure on oil prices," Fitch Ratings noted.
By Tsvetana Paraskova for Oilprice.com
More Top Reads From Oilprice.com:
Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More
U.S. Power and NatGas Prices Plummet to Below Zero
Ukrainian Drones Hit Major Rosneft Refinery in Russia
First Niger Oil Bound for China Blocked in West Africa Border Row
Gas Prices Likely to Keep Falling Ahead of Peak Driving Season
Drone Attacks Take Khor Mor Gas Field Offline, Claims Lives