Coronavirus Threatens Oil Producers With Double Whammy
A steep and prolonged decline in prices, combined with already-curtailed production, would pose a bigger economic threat than the last big downturn.
A drop in oil demand from China, and then globally, could be especially painful now.
Photographer: Giulia Marchi/BloombergThe coronavirus outbreak is already threatening oil markets. The fear of lower demand — from a disease-stricken China and eventually globally as the economic impact widens — has destabilized prices, sending crude to its lowest levels in more than a year. For major oil-producing countries, the declines, coming at a time of curtailed output, threaten economic shocks that if long-lasting could lead to the kind of political and regional instability that was avoided during the last steep drop.
China is the largest oil importer in the world by far, and its biggest suppliers are Saudi Arabia and Russia. In December, China’s General Administration of Customs reported oil imports of nearly 11 million barrels per day. With the virus still yet to be contained, people with inside knowledge of the Chinese energy industry estimate that oil demand in the country has dropped by about 3 million barrels a day, or 20% of total consumption.