The coronavirus epidemic had already shaved 3 percentage points off of Chinese crude oil demand growth as of end-January, Kayrros oil market monitoring reveals.
The virus is shaking global markets as demand for commodities in the world’s second-largest economy is taking a nosedive. Oil markets are particularly hard hit as China remains by far the main engine of oil demand growth, accounting for two thirds of global growth in 2019, according to estimates from the International Energy Agency. Kayrros proprietary algorithms detected that by the end of January, the coronavirus had slashed Chinese y/y crude demand growth to less than 5% y/y on average for January, the slowest growth rate since May 2019 and down from over 8% in the second half of 2019.
On the ground in Hubei Province, refineries are running; Kayrros satellite imagery processing shows that there have not been any crude stock draws in China despite low import levels, highlighting this decline in demand.
Though already significant, this decline, like the epidemic itself, has yet to run its course. Oil-market expectations of further declines, even more than recent demand losses, are driving oil prices down. Saudi Arabia is reportedly seeking significant crude oil production cuts to offset the decline, while OPEC representatives will be discussing additional cuts to offset plunging oil prices.
Satellite imagery, machine learning and other unconventional data are key in monitoring the impact of coronavirus felt on the ground and in markets, in near-realtime. Kayrros will continue using these techniques to monitor the virus in China and around the world.