Oil and Corona ... How are the "black gold" markets affected by the virus ?

Oil markets barely caught their breath after the page of the American-Chinese trade war was folded, until the new Corona virus appeared, killing 1369 people around the world (as of this writing), and causing heavy losses to the second largest economy in the world, and its repercussions affected the oil markets.

And fears of the spread of "Corona", in a wave of selling in the first trading sessions in the Chinese stock market, after the lunar New Year holiday, to cause the main index losses amounted to $ 393 billion in the third of February.

And the repercussions of this frightening spread of the virus, which scientists have not yet found a cure, have extended to multiple sectors, the forefront of which is the oil market, as the International Energy Agency reported, on Thursday, that global demand for oil will record its first quarterly decline in a decade, due to the damage caused by the spread of Corona (Which the World Health Organization calls "Covid 19") the Chinese economy and its implications for the world.

The agency said in its annual report that "global demand was affected by the spread of the new corona, and the wide closure of the Chinese economy."

She added, "It is expected that the demand for oil will decrease by 435 thousand barrels compared to the same period of the previous year, in the first quarter of 2020, the first quarterly decrease in more than 10 years," when the demand for oil decreased due to the global economic crisis.

In light of the concerns surrounding the Chinese economy, it became clear that the impact of the virus was greater than what experts and analysts had expected, which causes many to question the reasons for this impact on the global energy market.

Why did the world oil prices drop?

Energy market adviser Mustafa Al-Bazarkan explains in an interview with "Sky News Arabia" that oil prices are linked to the supply from producing and consuming countries, and with the industry of the second largest oil importer affected by the virus, demand will decline.

Al-Bazerkan added, “Besides the decline in Chinese industry, many flights to and from China were canceled, and maritime transport operations decreased, which affected the demand, and oil prices decreased.”

China’s oil demand fell due to travel restrictions to and from the country and quarantine in some of its regions, where the Chinese National Chemical Corporation said it would shut down a 100,000-bpd complex and reduce treatment rates for two other compounds.

Global growth in demand slowed

On Wednesday, OPEC lowered its forecast for global growth in oil demand due to the Corona outbreak, and said its production fell sharply in January, as producers implemented a new deal to reduce supply.

The Organization of Petroleum Exporting Countries "OPEC" said in a monthly report that it is expected that the global demand for oil this year will grow by 990 thousand barrels per day, down 230 thousand barrels per day from its previous expectations.

Since January 1, OPEC, Russia and other producers have implemented an agreement to cut production by 1.7 million barrels per day to support the market.

The report quoted secondary sources that "OPEC" commitment to cuts exceeded the required in January, as it reduced supplies by 509 thousand barrels per day to 28.86 million barrels per day.

Commenting on the report, Al-Bazarkan said that "OPEC" tends to be transparent in terms of the figures it reveals, and that the reduction is due to the spread of "Corona" and low demand, in addition to the increase in US oil production to exceed 13 million barrels per day.

As for his forecasts on world oil markets this year, Al-Bazarkan said that the matter is related to three parties, "OPEC" and the oil producing countries outside the organization, led by Russia, in addition to the United States of America, and it is their responsibility to reduce production.

The consultant continued in energy markets, saying: "So far the picture is not clear regarding the fate of Corona, and therefore the issue of the measures to be taken remains that way, but it is almost certain that oil prices will witness fluctuations this year, and will often range between 58-62 dollars a barrel."

Despite the seemingly unfavorable conditions regarding the oil markets, there is a glimmer of hope referred to in the report of the International Energy Agency, which predicted the growth of demand for "black gold" in the second quarter of this year, 1.2 million barrels per day, and then returned to normal in the third quarter with growth of 1.5 million Barrels per day in light of expected stimulus measures from China.

According to sources, the "OPEC +" group is considering holding an extraordinary meeting to consider deepening the production cuts in order to maintain the stability of oil prices.