OPEC has drastically lowered its forecast for oil demand, with the coronavirus outbreak weighing heavily on its outlook.
OPEC has slashed its outlook by 0.23 million barrels per day, with global oil demand falling almost 20 per cent from a peak in January as massive quarantines keep vehicles off the road and planes grounded.
“The recent outbreak of the coronavirus in China necessitated a further downward revision to the country’s oil demand growth forecast compared to last month, as transportation fuels, notably aviation fuels, are expected to be impacted in 1H20,” OPEC said in its monthly report.
The outlook now sits at 0.99 million barrels per day, making additional output cuts by OPEC producers – including Saudi Arabia and the United Arab Emirates – increasingly likely.
“The impact of the coronavirus outbreak on China’s economy has added to the uncertainties surrounding global economic growth in 2020, and by extension global oil demand growth in 2020,” OPEC said.
“Clearly, the ongoing developments in China require continuous monitoring and assessment to gauge the implications on the oil market in 2020.”
The timing of the outbreak also exacerbated the problem, as millions of Chinese nationals who were set to return home for the Lunar New Year had their travel plans curtailed.
China’s need for transportation fuels – particularly jet fuel and gasoline – have been the major sources of oil demand in China, with the share of Chinese jet fuel consumption tripling since 2003 to account for around 10 per cent of global demand. That rise was mainly due to expansions to existing airports and the construction of new domestic airports, along with a general increase in air travel activity.