Global oil demand could nearly halve if coronavirus threat escalates

Global crude oil demand could drop as much as 42 per cent to 0.77 million barrels per day (million b/d) from the current estimated 1.33 million b/d in February 2020 on a year-on-year basis if the Wuhan virus, or the crononavirus as it is also known, spreads more, says a note from S&P Global Platts.

“In the worst case, global demand growth will remain negative until May. In best case, it would bounce back to positive in March. Yet, notice worst-case is – for now – assumed recession-free. In worst-case, demand reduction would be comparable to a major slowdown. In best-case, it would be similar to a three-month warm winter effect,” S&P Global Platts note said.

The coronavirus already has financial markets rattled. While experience with virus outbreaks in the past suggests that they often bounce back quickly, the actual economic impact on China, according to analysts at Rabobank International, hinges on the ability of the Chinese government to contain the virus and its policy actions to mitigate the impact.

Also Read: What happens if China really does try to buy $52 billion of U.S. crude, coal, LNG?: Russell

Already key international airlines including British Airways, Lufthansa, American Airlines, United Airlines, Swiss International Air Lines and Austrian Airlines, suspended or reduced flights due to the outbreak. The virus has now impacted over 7,711 people globally, with cases emerging in India, the US and Europe, while the death toll across China has also climbed.

In its worst-case scenario, Claudio Galimberti, the head of demand, refining and agriculture analytics for Platts Analytics assumes the whole of China’s transport system will be impacted severely, with up to 23 per cent of passenger and freight trips being canceled across the country in February.

It also assumes China’s aviation demand will drop by an unprecedented 50 per cent in the same period.

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