BP sees short-term oil demand hit of up to 500,000 b/d from coronavirus

London — BP is expecting the China-focused coronavirus outbreak to reduce global oil demand by up to 500,000 b/d in early 2020 but remains upbeat that improving economic sentiment will support the oil market later in the year, the oil major's chief financial officer said Tuesday.

Refiners in China, the world's largest oil importer, are expected to cut both crude imports and throughputs as the coronavirus outbreak saps consumption, with transportation, manufacturing and industrial activities all slowing down.

"There is no question that coronavirus will impact demand this year," Brian Gilvary said on a quarterly earnings call. "We are currently seeing around 300,000-500,000 b/d impact on demand growth and we looking at 1.2 million b/d (demand growth for 2020) coming into the year...the question will be whether OPEC balances or not."

Gilvary said he expected spot Brent oil prices, which dropped to a one-year low below $55/b Monday, to stay around $55/b in the short term due to demand concerns over the virus, adding that "they may recover by the end of the year." Brent crude futures were trading 0.6% higher at $54.77/b in London at 1145 GMT.

Upbeat over H2 2020

The virus, which has killed at least 427 people and infected over 20,000 people globally, could hammer global oil demand by up to 2.6 million b/d in February, and 2 million b/d in March, according to S&P Global Platts Analytics' worst-case scenario. Under a best-case scenario, Platts Analytics expects a drop of 900,000 b/d in oil demand in February, and 650,000 b/d in March.

Further into 2020, Gilvary said BP expects stronger oil demand growth driven by improving global economic sentiment and the impact of the IMO 2020 rules on sulfur levels in marine fuels.

On the supply side, Gilvarey said BP sees stronger non-OPEC supply growth in 2020 driven by Norway, Brazil and Canada in addition to "solid" US oil growth with OPEC+ "continuing to be the balancing factor."