Demand shocks to dominate global oil market in 2020

The global oil market’s reaction to the emergence of the coronavirus has been large and swift. Oil prices lost nearly 20 percent of their value between late January and early February, highlighting latent market fears about falling global oil demand in 2020. China alone contributes some 30 percent of new oil demand each year, and more broadly, Asia contributes about 50 percent of new demand. The coronavirus’s ultimate impact on economic growth remains unclear. Based on scientific research around the virus and the speed of the authorities’ response, The EIU expects the virus to be broadly contained by March- end and eradicated during the second quarter.

Cailin Birch, Global Economist at The Economist Intelligence Unit, says, “This implies a major hit to economic growth in China and the rest of Asia in the first quarter, as passenger travel, industrial production, goods trade volumes, and consumer spending are all negatively impacted by quarantines, factory closures and the downturn in market sentiment. However, we believe that the Chinese government’s strong stimulus measures will allow for a rebound in economic growth from the third quarter as some pent-up consumer demand is released. Overall, we have revised down our forecast for China’s real GDP growth in 2020 to 5.4 percent (5.9 percent previously).”

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