The drop is probably the largest demand shock the oil market has suffered since the global financial crisis of 2008 to 2009/Bloombergby Bloomberg
Chinese oil demand has dropped by about three million barrels a day, or 20 per cent of total consumption, as the coronavirus squeezes the economy.
The drop is probably the largest demand shock the oil market has suffered since the global financial crisis of 2008 to 2009. The decrease in oil demand could force the hand of the Organisation of Petroleum Exporting Countries (OPEC), which is considering an emergency meeting to cut production and staunch the decline in prices, which are headed for the lowest close in four months.
The country consumes about 14 million barrels a day—equivalent to the combined needs of France, Germany, Italy, Spain, the UK, Japan and South Korea.
Chinese and Western oil executives said that the decline was measured against normal levels for this time of year.
The world’s second-largest economy has locked millions of people in quarantine and the New Year holiday has been extended. Flights have been cancelled and authorities across the globe are trying to contain the virus’s spread. China’s central bank, seeking to avert a sell-off after markets opened, is taking measures to boost liquidity.
The collapse in Chinese oil consumption is starting to reverberate across the global energy market, with sales of some crudes slowing to a crawl and benchmark prices in free-fall. Sales of Latin American oil cargoes to China came to a halt last week, while sales of West African crude, a traditional source for Chinese refineries, are also slower than usual.
Chinese refineries are storing unsold petroleum products such as gasoline and jet fuel. But every day stockpiles are said to be growing, and some refineries may soon reach their storage limits. If that were to happen, they would have to cut the amount of crude they process.
Traditionally during the New Year holiday, gasoline and jet-fuel demand increase as hundreds of millions go back home, while gasoline consumption drops as industrial activity slows.
OPEC and its allies, which include Russia, are weighing their options to respond to the crisis and there have been discussions about calling an emergency meeting.
Saudi Arabia is pressing for a gathering sooner than the one scheduled for 5-6 March 2020, though it has run into resistance from Russia.