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The Drop Is Likely The Largest Demand Shock Suffered By The Oil Market Since The Global Financial Crisis Of 2008-2009
Chinese oil demand has fallen by about three million barrels per day. Or 20% of total consumption, due to the impact of the coronavirus on the economy, according to people with information about the country’s energy sector.
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The drop is likely the largest demand shock suffered by the oil market since the global financial crisis of 2008-2009 and the most sudden since the September 11 attacks. The downturn could necessitate an intervention from OPEC and allies, who are considering an emergency meeting to reduce production and stop the drop in prices, which are headed for the lowest closing in four months.
“It’s really a black swan event for the oil market,” said John Kilduff, a partner at Again Capital in New York. “There was some hope for demand prospects this year before the outbreak. But that has been reversed. OPEC+ has to react. If there are no further cuts in production, the price decline will continue.”
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While BYD lays off 100,000 in China due to falling profits, the factory in Brazil remains strong: the unit in Camaçari, Bahia, could generate up to 20,000 jobs and become an export hub for all of Latin America.
Coronavirus And The Largest Oil Importer
Moreover, China is the largest oil importer in the world, having surpassed the United States in 2016, so any change in consumption has a huge impact on the global energy market. The country consumes about 14 million barrels per day – equivalent to the combined needs of France, Germany, Italy, Spain, the United Kingdom, Japan, and South Korea.
Abnormal Coronavirus Levels
Chinese and Western oil executives, speaking on condition of anonymity, said that the decline in coronavirus was measured against normal levels for this time of year. It is a measure of the current drop in demand, and not the average loss since the start of the crisis, which would be smaller.
Similarly, Beijing has quarantined millions of people, and the New Year holiday has been extended. Flights have been canceled, and authorities around the world are trying to contain the spread of the virus coronavirus. Traditionally, during the New Year holiday, the demand for gasoline and aviation fuel increases as hundreds of millions of people return home. Meanwhile, oil consumption is falling due to reduced industrial activity.
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