Coronavirus Oil Shock Threatens Double Whammy for Producers - Bloomberg

Coronavirus Oil Shock Threatens Double Whammy for Producers - Bloomberg:

The coronavirus outbreak is already threatening oil markets. The fear of lower demand — from a disease-stricken China and eventually globally as the economic impact widens — has destabilized prices, sending crude to its lowest levels in more than a year. For major oil-producing countries, the declines, coming at a time of curtailed output, threaten economic shocks that if long-lasting could lead to the kind of political and regional instability that was avoided during the last steep drop. 


China is the largest oil importer in the world by far, and its biggest suppliers are Saudi Arabia and Russia. In December, China’s General Administration of Customs reported oil imports of nearly 11 million barrels per day. With the virus still yet to be contained, people with inside knowledge of the Chinese energy industry estimate that oil demand in the country has dropped by about 3 million barrels a day, or 20% of total consumption.

We don’t yet know what toll the virus will take on global oil demand, especially if an economic slowdown spreads beyond China; estimates from BP Plc and OPEC put potential losses in the 200,000 to 600,000 barrel-per-day range. As containment efforts fall short and quarantine measures become more severe and widespread, markets need to consider that the worst-case scenario might be more realistic than previously assessed, and be mindful of the possible reverberations.