Singapore — Asia's refined oil product demand growth is expected to average 380,000 b/d in 2020, down from 780,000 b/d in 2019, posting its weakest growth since the global financial crisis of 2009, S&P Global Platts Analytics said in a report this week.
The slowdown in demand for petroleum products comes mainly on the back of a decline in China's oil demand growth due to the coronavirus outbreak that has severely impacted economic activity in the country.
Platts Analytics said it also slashed its outlook for global oil demand growth to 860,000 b/d for 2020, from its previous estimate of 1.33 million b/d at the beginning of this year, marking its weakest growth rate since 2011. It also noted there was a chance of a further downward revision if the impact of the coronavirus outbreak worsens beyond what is assumed by the study.
"Global growth is set to take a hit as China's demand is severely impacted by the outbreak of coronavirus, coupled with much warmer-than-normal winter weather in the Northern Hemisphere," it said, adding that while flight cancellations have hit jet fuel demand, domestic travel restrictions have also affected the movement of millions of workers within China.
"As a result many factories in China remain closed or are running below capacity. As factories around the world rely on Chinese products, much lower production and fewer shipments from China have been disrupting global trade and supply chains already. This in turn has been leading to a negative impact on oil demand in other countries," it said in the report.
Platts Analytics said Asia, which accounted for 68% of global oil product demand growth on average between 2011 and 2019, is now expected to account for only 44% of global growth in 2020. The steepest drop comes in China.
China's oil product demand growth is expected grow by just 170,000 b/d this year, with wider implications for global oil markets, Platts Analytics said.
It said demand destruction of liquid fuels in China will manifest as higher crude and product stockpiles, reduced crude buying for future deliveries, refiners being forced to cut throughput level, and reduced demand for various crudes.
Other countries are less impacted.
"Among major Asian nations, India is least directly hit by the coronavirus outbreak in China and the Far East," Platts Analytics said, adding that India's product demand will instead be impacted by slower economic recovery, weak vehicle sales and higher fuel prices.
However, the extent of the spread of the outbreak is still uncertain.
"If this epidemic were to turn into a global pandemic, with other large economies being affected in a similar way China has so far been, then the effects on global oil demand in the first half of 2020 could be close to catastrophic," Platts Analytics said.