BAKU, Azerbaijan, Feb.4
By Leman Zeynalova – Trend:
For Q1 2020, China’s demand is expected to decline by over 450,000 b/d versus 4Q 2019 (a 3.5 percent drop) due to coronavirus outbreak,Trend reports citing Wood Mackenzie research and consulting company.
“February demand really suffers, but if containment starts to work by early Q2 then a strong rebound in demand is likely through early summer, as we saw post-SARS in 2003. Even with this, China’s overall annual oil demand growth for 2020 has been revised downward by over 200,000 b/d from our early January outlook,” said the company.
Wood Mackenzie said there’s a lot of panic in the market right now, reflected in Brent’s double-digit percentage drop through January.
“But things may not be as bad as some suggest. Talk of something like a 20 percent drop in Chinese oil demand is alarmist and risks skewing oil prices to the downside. Even if Chinese jet fuel demand were to drop to zero – which it won’t – then this still only represents some 7 percent of the country’s total oil demand.”
Media reports suggest China’s LNG buyers could declare force majeure on contracted cargoes.
Wood Mackenzie believes this is possible as contracts often include epidemics as a trigger and the government has reportedly offered companies FM certificates.
“LNG demand has fallen off a cliff since January (an LNG trader just told me Chinese demand has ‘disappeared’) and buyers will be looking at all options. Force majeure could provide relief for Chinese buyers but should always be considered an option of last resort.”
The WHO has announced that the novel coronavirus (2019-nCoV), first detected in Wuhan, is now a ‘Public Health Emergency of International Concern’. As of February 4, there are over 20,000 cases of 2019-nCoV confirmed globally, the vast majority within China.
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