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As a result of the Coronavirus outbreak, the global oil demand is expected to shrink during the first quarter of 2020, for the first time in 10 years.
According to a report by the International Energy Agency (IEA), global demand for oil is expected to drop by 435,000 barrels a day in the first three months of this year compared to a year ago.
“There’s little doubt that the virus will have a larger impact on the economy and oil demand than did SARS,” the IEA said in its report.
“While steps taken in China to reduce its spread were adopted earlier than in the SARS crisis and have been far more extensive, the profound transformation of the world economy since 2003 means China’s slowdown today is bound to have a stronger global impact,” the report added.
The Paris-based agency has also a grim prediction for the rest of the year. Demand for oil is expected to increase by just 825,000 barrels per day, the weakest annual pace since 2011.
The IEA said in its monthly oil report, it was difficult to measure the impacts from coronavirus at this stage.
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“The onset of [the coronavirus] will likely have a large impact on both the world’s economy and oil demand,” said the agency. “Consequences will vary over time, with the initial economic hit on transportation and services, likely followed by the Chinese industry, then eventually exports and the broader economy.“
The deadly pandemic-now officially called Covid-19-has forced many factories in China- including giants such as Apple’s largest manufacturer Foxconn- to shut down.
Some 60 million people are on lockdown since China has quarantined entire cities in the Hubei province, at the epicenter of the virus outbreak. Foxconn factory workers were reportedly told to get back to work earlier this week, however, only 10% of them did so, according to Reuters.
Shipyards around the country are experiencing a labor shortage, a Hong Kong-based shipping company told the New York Times. In Japan, Nissan said it would shut down one of its factories for four days because it couldn’t get supplies from China.
There is a small silver lining to the crisis: The plunge in demand for oil could mean a decrease in carbon emission. China is the world’s biggest carbon polluter.
