The world health organization has announced an official name for the disease that is causing the 2019 novel coronavirus outbreak, first identified in Wuhan China. The new name of this disease is coronavirus disease 2019, abbreviated as COVID-19. Much is unknown about the virus. It is believed to originate from an animal source but is now spreading from person-to-person similar to influenza and other respiratory pathogens.
Economically, epidemics are similar to natural disasters. For instance, a large number of Chinese tourists are spending very little money during Q1 2020. Due to lack of tourism, China and other Asian countries such as Cambodia, Thailand, Singapore, and Vietnam will face a loss of income.
Additionally, more than 20 provinces and other regions have been instructed to extend the New Year holiday until February 10. These parts account for 80% of national GDP, and 90% of exports. In turn, Asian countries along with Chile, Peru, South Africa, Russia and Brazil who rely on China’s intermediary goods will suffer as well.
Global crude oil demand will decline in the first quarter of the year for the first time since the 2008 financial crisis. Brent crude oil and WTI prices have fallen over 20% from the 2020 peak in January. This demand is forecasted to continue to fall throughout the first three months of 2020 due to the economic slowdown in China, the world’s biggest oil and natural gas importer, caused by the coronavirus outbreak. World fuel consumption will grow by 435,000 barrels a day during the three-month period instead of the previously anticipated 800,000 barrels a day. Double-digit percentage falls in oil prices this year have been exacerbated by the economic downturn in China. The coronavirus’ effects will cut annual growth by an estimated 30%, to 825,00 barrels a day, the lowest point since 2011. This is a more significant effect than that of the 2003 SARS epidemic due to China's increased integration with the world economy. This month, the Brent crude price rose 1% to $56.34 a barrel yet it remains 18% below a peak reached in early January.
Oil and petrochemical refineries are scaling back operations due to declining demand for their products. The demand for Chinese jet-fuel is expected to fall 14% below last month's forecast for the first yearly quarter. And gasoline and diesel fuel demand will fall 13% and 12% below last month's forecasts. Global oil refiners will be hit by this decreased demand. The IEA's global refinery runs forecast for 2020 is 700,000 barrels a day. Without the impact of the coronavirus on global demand, OPEC might have successfully balanced the oil market this year.
by Rodolfo Rodriguez and Alejandra Lopez
