Oil prices are feeling the coronavirus effect as the global commodity recorded its worst show in the international market in the just concluded week on the outbreak of the coronavirus.
With the spread of the virus accelerating within its borders, a downturn in the Chinese economy is envisaged to impact oil demand significantly in light of China’s current status as the world’s largest crude oil importer, having imported a record 10.12 million barrels per day (bpd) in 2019.
Interestingly, China is equally the largest oil consumer in the world after the United States. Already, oil prices have come under pressure due to oversupply and a slowdown in China’s economic growth.
Over 33 million people are now under travel restrictions in a bid to contain spread, a measure that might reduce oil demand further.
Brent crude, against which Nigeria’s Bonny Lite is benchmarked, dipped by 2.2% on Friday alone to ease at $60.69, bringing its weekly decline to 6.4%, which made it the third consecutive week it would depreciate.
The US West Texas Intermediate (WTI) plunged by 2.5% of $1.40 the same day to settle at $54.19. It was the fourth consecutive day of losses just as it fell by 7.4% for the third straight week.
Latest count reveals the fierce epidemic has claimed 56 lives while leaving 1,975 desperately ill since its discovery in the Chinese city of Wuhan on New Year eve.
It has advanced to South Korea, Japan, Thailand, Vietnam and the US with Canada recording its first case and Australia its first four on Saturday.
France has also confirmed three cases.
Its similarity to Severe Acute Respiratory Syndrome (SARS) has raised fears concerning oil futures given that oil prices plummeted by almost 20% when the latter broke out between 2002 and 2003.
The impact of the SARS plague was short-lived then because it was brought under control but UK researchers have warned of a real possibility that China will not be able to curb the virus.
JP Morgan said $5 per barrel could be shaved from oil prices if the crisis escalated to “SARS style epidemic.”
Experts are of the opinion that the economic impact of the viral outbreak could prove the oil market’s biggest nemesis this year.
According to Goldman Sachs, the market could experience a fall of 260,000 barrels per day in the global oil demand market if the virus affects the market the same way SARS did in the past.
Nigeria’s 2020 budget oil price benchmark has been set at $57 per barrel despite the Central Bank’s warning late last year that it is not sustainable.