Powered by MOMENTUM MEDIA

‘No respite’ for oil and gas

Lachlan Maddock
— 1 minute read

Rolling global lockdowns will pummel the energy sector, with greater diversification needed if the industry is to survive the crisis.

Travel restrictions and quarantines that started in China and which are now rolling out across the rest of the world will limit the use of jet fuel and hamper industrial activity over the coming months, and global oil demand has fallen by almost 3 million barrels per day. 

Sharp demand drops in Asia, particularly China, are unlikely to return to normal at least until mid-April,” said Kaho Yu, senior political analyst for Asia at Verisk Maplecroft. 

Advertisement
Advertisement

“As a result, exporters have been eyeing alternative storage and refining destinations, such as Europe’s large wholesale market. However, this will likely change over the coming weeks as the COVID-19 in Europe continues to escalate,” he said.

But Europe’s major oil gas players – Italy and Germany – have been hit particularly hard by the coronavirus outbreak and have taken drastic containment measures, including the suspension of industrial activity. Regular pipeline and shipment imports and high storage levels will also hinder Europe’s ability to take in extra volumes. 

With disruption now expected to last until Q3 – and the coronavirus spreading freely throughout Europe – oil companies will now be looking back to Asia. 

“A comparatively stabilising Asia, particularly India, will likely be the next destination if Europe-bound cargoes are eventually diverted or resold due to containment measures,” Mr Yu said. 

“One lesson is that the performance of oil and gas players is highly weighted towards the outbreak in the countries they operate in and the level of exposure to China. There will be an increased need for a diversification strategy when oil and gas businesses come back online.”

 

‘No respite’ for oil and gas
investordaily image
ID logo

related articles

promoted stories

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.