Rystad Energy is ‘heavily revising’ its annual global oil demand growth forecast down by 25% to 820,000 barrels a day (b/d) in 2020 – as the coronavirus epidemic has triggered restrictions in China’s public transport and air travel.
In a statement issued today (11 February), Rystad Energy added that – in its worst case scenario – ‘the coronavirus’ impact on demand growth could be even wider, slashing growth to as low as 650,000 b/d year on year (y/y)’.
Bjornar Tonhaugen, Rystad Energy’s Senior Vice President, Head of Oil Markets, commented: ‘Our current assessment implies that the impact of coronavirus will persist throughout all of February and March and will then gradually subside towards June 2020. We hence expect travel restrictions and extended holidays in China to significantly impair demand in 1Q20 and partially in 2Q20. Demand is forecast to start recovering in April and May.’
China has – so far – been the country most effected by the coronavirus – and the its oil markets will be most affected by the disruptions. However, other countries will also see a drop in demand growth.
Rystad Energy commented: ‘We now believe that the projected global oil demand growth in the first quarter will be almost entirely wiped out. Rystad Energy’s estimates show that demand will grow by only 0.1 million b/d, a steep decline from a previously projected y/y growth of 1.2 million b/d for 1Q20.
‘Of the above, 0.9 million b/d of the growth’s decline is attributed to lower demand in China and 0.2 million b/d to the rest of the world. Overall, we expect Chinese demand to drop in 1Q20 by 0.3 million b/d y/y, instead of growing by a previously projected 0.6 million b/d. This will be the first quarterly y/y drop in seven years.
‘Similarly, the rest of the world’s demand, excluding China, which had been projected to grow by 0.6 million b/d in 1Q, is now expected to grow by only 0.4 million b/d.’
Many analysts have tried to judge the likely effects of the coronavirus on global trade and benchmark prices by drawing parallels with the SARS virus of 2003. But, as Rystad Energy points out, China now has a much bigger influence on the global economy than it did in 2003. This is especially true of the energy sector. China’s oil demand, said Rystad Energy, has more than doubled since 2003 and accounted for 13% of the global total in 2019, standing at 13.6 million b/d.
Rystad Energy added: ‘The country accounts for 14% of global air passengers carried and around 13% of global trade in goods, which is why the impact of a similar virus outbreak as SARS will likely be even greater now. Moreover, the death toll from the coronavirus reported this weekend has already surpassed that of SARS in 2003, and we see a risk that the coronavirus impact may be understated.’
The disruption to China’s aviation sector has captured the headlines in the general media – but the coronavirus outbreak has also impacted activities in ports, which has had a knock-on effect for bunkering.