The near-term impact of the coronavirus outbreak on oil demand remains uncertain as much depends upon when and how China’s manufacturing industry restarts after the extended Lunar New Year public holiday
Consultancy groupWood Mackenzie has lowered its oil demand forecast for Q1 2020 by nearly 900,000 bpd to 98.8mn bpd. Much of the drop is attributable to efforts to contain the outbreak, including flight cancellations.
Ann-Louise Hittle, vice-president, Macro Oils, said, “The Q1 2020 fall in Chinese demand – a 200,000 bpd drop to 13mn bpd - is the first y-o-y decline in the country’s demand since 2009.
“OPEC is holding emergency talks to consider an additional 500,000 bpd cut, on top of its already agreed steep output quotas in a bid to balance the market and shore up crude prices.
“It’s a dilemma for the group because the duration of the hit to oil demand – particularly from China, the world’s largest oil importer - is not clear.
“Yet, without a further production cut, crude oil prices will remain under pressure and struggle to hold the mid-US$50 per barrel price for Brent, let alone recover to above US$60 per bbl before Q2 2020.”