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How the coronavirus outbreak is affecting global energy demands

The most recent US-Iran political conflict saw much tension to the Iranian oil facility. Iran, closed with exports of 500,00 bl/d average since May 2019 when sanctions were ended by the US government. Verisk Maplecroft reported the gradual change had a massive impact on the country’s economy. 

 However, the energy world was then greeted by another wave of uncertainty; the novel coronavirus outbreak originating from China. Top dogs in energy companies have been looking forward to pushing agendas on the list as the US-China economy war cooling off while growth globally is still strong. 

 The Chinese city of Wuhan remains in lockdown this week, disrupting the airline industry from international and long haul flights, and many factories that have yet to continue operations past the Lunar New Year break. 

As reported by Upstream Online News, other industries that have temporarily ceased operations include offshore ships and fabrication yards, where “force majeure” notes have been sent out to notify clients of the potential delay. “Force majeure” is a notice sent to clients when the main business is unable to fulfil the contract within the agreed time frame due to unforeseeable events.

One such business, Wuchang Shipbuilding Industry has reportedly been closed down until further notice, as they are located in the centre of ground zero – whereas other shipping yards merely restarted after the Lunar New Year festivities. Other businesses that have migrant labour currently under quarantine from the infected Hubei province may have to stay positive amidst the epidemic a while longer. 

In Vienna, the Organisation of Petroleum Exporting Countries or better known as OPEC met for a technical meeting. The talks involved pushing the meeting set for 6th of March this year to an earlier date in February as outlook on oil and gas demand seems to be getting worse. Globally, the demand is expected to decrease, with speculations that LNG purchasers in China  will send out a “force majeure” notice. Petroleum analysts have predicted that the average rise of crude prices could be set at approximately $65 per barrel so long as OPEC keeps oil supplies constrained. 

The outbreak, which emerged during the Lunar New Year celebrations, came at a difficult time in China, whose economy is facing a deep slowdown in almost thirty years along with trade rows with the US. China and US relations remain rigid as Washington has been accused of overestimating the scale of the outbreak by China’s capital.

At the time of reporting (4th February) China confirms 23 718 novel coronavirus cases and a total of 491 fatalities. This number rivals the death toll of the SARS outbreak in 2002 and 2003 significantly.

Outbreak aside, there had been a move toward new production in the US to avoid tariffs. Some manufacturers have since moved from China toward Southeast Asian countries such as Vietnam for production and shipping. In an effort to bolster their own economy, the Chinese central bank has been pouring its own reserves into local companies. This difficult moment in China sees them putting in barriers and other measures to contain the virus outbreak within its own borders, while globally, the energy industry faces a commercial fever of its own.


  1.     Upstream Online
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