Coronavirus Declared International Public Health Emergency
January 31st, 2020
The World Health Organization(WHO) declared yesterday that the coronavirus is public health emergency of international concern, which added to the selling and risk off for the markets.
Flight cancellations have reached about 30% in some parts of China, according to experts at S&P Global Platts. The cancellations can result in about 200,000 barrels a day in reduction of jet fuel consumption worldwide. Last week, the Chinese government placed a travel lockdown on the city of Wuhan, the center of the outbreak, as well as, other cities in the nation’s Hubei province.
Wuhan International is central China’s busiest airport, handling an estimated 25 million passengers in 2019, and it is roughly the 15th most active in terms of China’s passenger traffic. Jet fuel demand over the past 5-years has accounted for 15% of Chinese oil demand growth.
The travel lockdown in China has affected approximately 125,000 bpd (out of 300,000 bpd total) in road transport demand for gasoline and diesel in the Hubei province of China so far.
The Saudi Arabia oil minister is attempting to gather OPEC for a meeting in February versus their official meeting in March due to the recent crash in prices. They may attempt to revise their output cut agreement and extend it through June versus March. The current selloff and concerns about the economic and energy demand reduction due to coronavirus has OPEC concerned. Many market participants felt that OPEC would need to act in March anyway to keep supply and demand closed to balanced. The outbreak of the coronavirus has just moved OPEC’s this timetable forward if they can get agreement to move the meeting to February.
The energy markets have held support, but the bulls will need to do more than this to make this current stop of the selloff just a temporary pause in the decline. Bulls need upside follow through and eventually the break above key resistance level to suggest the end of the downtrend.