The outlook for oil demand growth in 2020 is “far into negative numbers for the year,” said Rystad Energy’s Head of Analysis Per Magnus Nysveen, following the announcement on Friday by US President Donald Trump of a state of national emergency due to the coronavirus outbreak.
The US currently consumes around 20 million barrels per day of petroleum products, while global growth over the past few years has been around 1 million barrels per day. The ensuing impact from an increase in US quarantines and travel bans on road fuel demand and jet fuel will likely be drastic.
“This new step in combatting the virus will alone erase several million barrels per day from oil demand over the next couple of months, and dragging down global oil demand far into negative numbers for the year,” said Nysveen.
Trump also announced that the US government would be purchasing oil for the country’s Strategic Petroleum Reserves (SPR), which stores petroleum for emergency uses. “We’re going to fill it right up to the top,” the president said. The announcement was likely a move to increase demand for crude as the ongoing price war in the oil market will hit US shale oil producers hard.
“This SPR (Strategic Petroleum Reserves) crude purchase that the President announced will support crude prices, but because of the massive oversupply, it will not be enough to balance the impact of the national emergency on fuel consumption… we expect this coming purchase will add to crude demand by maximum 200,000 barrels per day over the next three months,” said Nysveen.
Trump’s declaration of a national emergency allows the Federal Emergency Management Agency (FEMA) to assist local, state, and country authorities in additional funding for testing and hospitals and support for community and corporate lockdowns. The coronavirus has infected over 2,000 people in the US, with 56 dead.
The global economic cost of the coronavirus still remains to be counted. Some experts have already suggested that the global economy will likely face a recession in 2020, with the airline industry being particularly hard hit as governments continue to expand travel bans. In an unprecedented move, Trump on Thursday announced a shutdown of all travel from Europe to the US for 30 days.
Financial markets have been hammered by virus-related panic with the US S&P 500 Index ending a historic 11-year bull run. Central banks have moved to respond and calm markets.
