China’s overall demand for oil has decreased by a total of 20% due to the Coronavirus.
Oil Demand Decrease
The drop in China’s demand for oil has dropped. The 20% drop roughly equates to about three million barrels a day. This information comes from people who work within the energy sector. They indicate that the Coronavirus is putting a strain on China’s economy as well.
This change is significant due to the fact that China is the largest oil importer in the world. This is only their fourth year at the top, taking over from the United States in 2016.
The fact that they are on top means that the drop in their demand affects the overall energy market.
Prior to the Coronavirus, China was consuming 14 million barrels a day. This amount equates to the combined daily usage of countries like Germany, Spain, Italy, Japan, the United Kingdom, and more.
Officials from both China and the West are quick to qualify the drop. They say that the decrease is being measured against normal levels and not when the Coronavirus came on to the scene. The drop from the Coronavirus is generally thought of as smaller.
However, it must be stated that Coronavirus is playing a hand with the drop in oil demand. Many citizens are currently quarantined due to the virus. Flights in and out of China are suspended and the government has also extended the New Year’s holidays.
China is currently storing petroleum products. These include jet fuel and gasoline. However, the amount they are storing is quickly reaching its limit. When this happens, the amount of crude they process would drop. Executives say that they are likely to decrease it by 15 to 20 percent.
This drop is the largest single drop in a country’s demand in more than 10 years. The last known massive demand drop was during the 2008 to 2009 global financial crisis. It is also one of the most sudden drops, topping off the 9/11 terrorist attacks.
This massive drop may force the hands of the Organization of the Petroleum Exporting Countries (OPEC) to make a decision regarding oil prices.
OPEC is reportedly planning on having an emergency meeting. In this meeting, they will address the drop in oil prices which is downtrending to its lowest close. They may decide to cut back on production.
Saudi Arabia is pushing to have the meeting as soon as possible. However, Russia reached out to them and told them to wait.
Instead, OPEC will come together for a technical meeting. This meeting will see them try and analyze the situation. They will take their findings back to the ministers.
Consultants in the energy industry say that OPEC is looking at an “informal proposal”. This proposal will cut back production by half a million barrels per day. However, not everyone is supportive of the idea.
Analysts say that since OPEC is already experiencing cuts and price drops, they may not be open to many proposals at the time.