Video Transcription:
The Oil Demand Crisis | The Corona Correction | Refinitiv
Welcome to the Corona Correction Series in association with Refinitiv, I'm your host, Roger Hirst. In many ways, it was oil that was the canary in the coal mine. Even U.S. equity markets were showing strength in February. Commodities, and particularly oil, where demand is driven by the real economy, continued to fall, indicating that there was a significant demand issue on the horizon. And despite the best efforts of OPEC +, the oil price continued to fall, eventually leading to an all out oil price war amongst its key export nations. Is this move in oil going to be a short, sharp shock? Or is it the beginning of a prolonged period of lower prices? Ehsan Ul Haq is a senior oil analyst at Refinitiv, and I asked him if he sees light at the end of the tunnel. The oil market is facing a double whammy of Coronavirus outbreak on the one hand, and a deteriorating relationship between Saudi Arabia and Russia on the other. As far as oil demand is concerned, we have seen jet demand going down significantly as airlines cut flights and people travel less and less. But other transportation fuels have also been impacted. We are going to see lower prices for at least for a few months, and both European and Asian markets will be impacted. There is less impact on the US market, but if this continues then there will also be some impact. As far as demand for other products such as naphtha is concerned, it might also be impacted, but not as much as jet aviation fuel and transportation fuels such as diesel and gasoline. Demand this year is unlikely to grow, but probably if the world is able to find a solution to Coronavirus, we might see demand increasing significantly this year. But this year things are looking looking gloomy and we don't see anything improving in the near future. So jet and aviation fuel has been at the epicenter of the decline in demand. This looks unlikely to change anytime soon. Europe's ski resorts have pretty much closed, and the outlook for Summer remains very precarious. Airlines continue to cut capacity and many are on the brink of bankruptcy already - but this is one area where government support is expected. And the outlook across all energy demand remains poor. Even if we see a peak in Coronavirus fear in the next few weeks, we will not see normality resume in the near future. The lockdown periods are expected to last a lot longer than originally anticipated, and even once the worst has passed, whenever that is, tourists will remain reluctant travelers. Whilst businesses will be focusing on shoring up their cashflow before they can start to focus on the sort of growth that will drive the demand for oil. We'll see you tomorrow with another update.