A fast-spreading coronavirus in China has sent shockwaves through global energy markets, prompting OPEC and its allies to consider deepening crude supply curbs as Asia’s largest oil refiner has slashed over a tenth of its output. More than 1,350 people have died as a result of the virus, most of them in China.

Bracing for an oil demand fall-off

Because of the outbreak, oil demand is set to fall year on year in the first quarter for the first time since the depths of the financial crisis in 2009, the International Energy Agency (IEA) said on February 13. The Organisation of the Petroleum Exporting Countries (OPEC) and the US Energy Information Agency also cut their outlooks for demand in 2020. Global commodity trader Trafigura Group expects the outbreak to cut 2020 global oil demand growth by 300,000 barrels per day (bpd) to around 1 million bpd. Brent crude, the global benchmark, is down roughly 15 per cent since the beginning of the year as the virus has spread.

West Asia seeks crude buyers

Some West Asian crude oil producers have asked Asian buyers if they could take more crude under their term supply contracts, as Chinese refiners cut purchases due to the outbreak. Iraq’s Oil Marketing Co and Kuwait Petroleum Corp have asked buyers if they have room for more crude cargoes loading in March. Qatari energy companies are “actively engaged” in accommodating rescheduling or re-routing requests on some deliveries of oil and gas cargoes to China.

LNG tankers change course

Four liquefied natural gas (LNG) tankers bound for North Asia have changed destination or diverted after the outbreak hit gas demand in China. In addition, 15 LNG tankers are flagged as “floating storage” globally, with 11 scattered across Asia. Several analysts cut gas demand forecasts for China, expecting the outbreak to depress industrial, commercial and transportation appetite in the world’s top gas importer.

ChemChina slashes output

State-run ChemChina has joined Chinese refining peers in slashing output, lowering production by around 100,000 bpd as the epidemic cuts fuel demand. The cuts by ChemChina, formally known as China National Chemical Corp, take total reductions by refiners in the country, including state majors Sinopec, PetroChina, CNOOC as well as independent plants, to some 1.5 million bpd over just two weeks.

International air traffic down

Early stages of the outbreak crisis led to a 70 per cent fall in international air traffic in China while domestic air travel fell 50 per cent, the IEA said. It cut its first-quarter Chinese jet fuel demand forecast by 14 per cent or 125,000 bpd and its second-quarter forecast by 15 per cent, or 140,000 bpd.

OPEC, allies consider supply cuts

OPEC and its allies are in discussions to bring forward a policy meeting to this month from March, and to consider deepening oil supply curbs by an additional 500,000 bpd to 2.2 million bpd.

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