Oil extended the worst start to a year since 1991 after China’s oil consumption was said to plunge by 20% amid efforts to control the spread of coronavirus.
Futures in New York sank to the lowest levels in a year on Monday as oil demand in the world’s biggest importer dropped by around 3 million barrels a day, according to people with inside knowledge of the country’s energy industry. West Texas Intermediate and Brent forward curves weakened sharply — with Brent flipping to contango for the first time since July — further signaling slack demand for crude.
The outbreak threatens what could be the largest demand shock since the global financial crisis. The effects are starting to ripple around the globe, as some Chinese refineries slow down or halt operations and cargoes of West African oil are being resold. OPEC and its allies are considering an emergency meeting to discuss deeper crude production cuts in an effort to stabilize prices.
“The demand story is focused on China and we’ve broken past oil’s psychological levels,” said Bill Farren-Price, a director at consultants RS Energy Group. “The danger is that the trajectory of the problem is not fully understood.”
Beijing has locked millions of people in quarantine and the New Year holiday has been extended. Flights have been canceled and authorities across the globe are trying to contain the virus’s spread. Traditionally during the New Year holiday, gasoline and jet-fuel demand increase as hundred of millions go back home, while gasoil consumption drops as industrial activity slows.
Business activity in China is expected to decline, prompting Beijing to consider seeking flexibility on its trade deal with the U.S. that’s supposed to take effect this month, according to people familiar with the matter. The U.S. Centers for Disease…
Source: FuelFix
