The real impact of novel coronavirus (Covid-19), a major global public health emergency, is still unfolding globally. Covid-19 has killed at least 2,800 people worldwide, the vast majority in mainland China, and there have been more than 82,000 global cases of infection, while writing this comment piece. There are infections in every continent except Antarctica, and countries in the Middle East and Europe are implementing emergency measures to prevent further spread of the virus.
According to the IEA (International Energy Agency) February 2020 Oil Market Report, global oil demand has been hit hard by Covid-19 and the extensive closure of China’s economy. As per the report, demand is expected to fall by 435kb/d year-on-year in the first quarter of 2020, the first quarterly contraction in more than 10 years. The IEA has cut its 2020 growth forecast by 365kb/d to 825 kb/d, the lowest since 2011. The IEA has also revised down the outlook for global refinery runs. Chinese crude throughputs for the first quarter of 2020 have been cut by 1.1mb/d and are now expected to contract by 0.5mb/d year-on-year. As a result, global runs are forecast to expand by just 0.7mb/d in 2020.
As per the latest reports, Saudi Arabia has placed a temporary ban on Umrah pilgrims in an attempt to ensure public safety by preventing the spread of the coronavirus. Many business, sporting and lifestyle events around the world are getting cancelled, or postponed as a result of the virus outbreak, which is even threatening the cancellation of this summer’s Olympic Games in Tokyo. As flight cancellations reach an alarming level in many parts of the world, there could be a reduction of about 200,000bpd of jet fuel use globally, or 3% of global jet demand, according to some estimates.
According to ICIS, efforts to contain the virus have disrupted global trade-flows of material in the petrochemicals industry, which has restrained movement in the shipping industry. Shipping companies which carry goods from China to the rest of the world have reduced the number of seaborne vessels. China is home to seven of the world's 10 busiest container ports. Approximately 80% of global goods trade by volume is carried by sea. As the location of the virus epidemic and a key driver of global petrochemical demand, outlook in China will have a vital impact on the trade flows of materials across the globe.
As China is now the address of global manufacturing supply chains, which eventually boost demand for petrochemicals, the virus outbreak and the resulting breakdown in economic endeavours are alarming. For example, demand for polyethylene in China could drop by around 1.5 million tonnes, as a result of the virus. The real impact of Covid-19 on the Chinese and global markets is yet evolving as the risk of contagion remains and could continue to weigh down on demand in the long term.
For the latest refining and petrochemical industry related videos, subscribe to our YouTube page.