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The real blow to the oil market is yet to come

US, WASHINGTON (NEWS OBSERVATORY) — Since the beginning of the year, almost every analyst or banking institution has made forecasts to reduce oil demand due to the devastating effects of coronavirus.

The number of cases of coronavirus in China – the world’s largest oil importer – has stabilized in recent days, so there may be those who believe that the worst for oil demand is behind us.

However, in the near future it is worth preparing for the next upheaval, as the world’s largest oil consumer, the United States, begins its own war against the deadly virus.

When China first banned entry into the areas most affected by coronavirus, oil demand dropped significantly. Analysts tried to determine the possible loss of oil demand.

When it became clear that China did not control the situation, other countries closed their borders and stopped air transportation, which worsened the forecast for demand.

On Wednesday, WHO officially announced the situation with the COVID-19 pandemic, adding: “We are deeply concerned about both the alarming levels of spread and severity of the coronavirus and the alarming levels of inaction …”

“Although travel restrictions may seem like the right step, this is not what WHO usually recommends. Now it is due to the social disorganization that they cause and the intensive use of the necessary resources,” said WHO spokesman Tarik Yasharevi.

“Not!” travel from Europe to the USA

Nevertheless, on Wednesday, US President Donald Trump ordered to suspend all trips from Europe, with the exception of Great Britain, to the United States for the next 30 days amid the spread of coronavirus.

This affected the demand for oil in China. Last month, the IEA warned that oil demand in the first quarter would drop to 435 thousand barrels per day. It was then that the development of the virus was concentrated in China.

According to the EIA, as of 2017, the United States consumed 19.96 million barrels per day of oil and oil fluids, 20% of global oil consumption. China consumed 13.57 million barrels per day in 2017.

In the United States, not only the travel ban will affect oil demand. Coronavirus caused panic. As a result, household items in most stores and on the Internet became inaccessible, including primarily hand sanitizers, antibacterial soap and toilet paper.


Everyone loves sports. But even he is not protected from the virus. On Wednesday, the NBA canceled the season when one player found a coronavirus. On Thursday, the NHL said it was canceling the remaining 189 games of the season. MLB may also suspend its activities.

All these cancellations are unprecedented events in professional sports, and this, of course, will lead to a decrease in oil demand, because the flow of fans and teams to events that are not held will stop.

State of emergency

Michigan, Tennessee, California, Massachusetts, Washington, Washington, DC, Arizona, Colorado, North Carolina, Alaska, New York, Ohio, Wisconsin, Kentucky, Florida introduced a state of emergency.

In Michigan, all public universities have closed and switched to online education. Courts stop holding a jury trial; the state governor has recommended canceling any gatherings in which more than 100 people should attend. This will stifle economic activity and the demand for fuel and oil.

And, despite the fact that New York – a city with a population of 9 million people – seeks not to repeat the fate of Italy, while schools and subways remain open. However, Broadway, which provides performances for 14 million people a year, may be closed.

In California, some educational institutions are closed, including Berkeley and Stanford. Hollywood cancels or reschedules releases. The number of business trips decreased, this sector is unlikely to recover this year.

From zero to negative territory?

OPEC was the last organization to review oil demand growth, from 980 thousand barrels per day in 2020 last month to 60 thousand barrels per day – in fact, this is a forecast of zero growth. While people accumulate everything necessary to stay at home, sports and leisure activities are canceled, academic institutions send children home, an additional blow will be dealt to the growth in oil demand.

Analysts may revise forecasts next month. It is worth taking into account the number of confirmed cases of coronavirus in the United States and analyze public opinion as an indicator of an increase in oil demand – or a loss.


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Article is written and prepared by our foreign editors from different countries around the world – material edited and published by News Observatory staff in our US newsroom.