Singapore — Plummeting oil and gas consumption in China in the first quarter of 2020 is likely to be replicated in the rest of Asia's developing countries as the coronavirus outbreak triggers more lockdowns and transport disruptions.
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Hence, Asia is not out of the woods yet, despite focus on the worsening outbreak in Europe and the US. As economic forecasts for the region get dire by the day, they signal more demand destruction for a range of transportation and power generation fuels in coming months.
This is increasingly bearish for refinery margins, product cracks, fuel prices and eventually oil and gas demand. Trade flows will be disrupted; oil refining and trading hubs like Singapore supply large volumes of gasoline, jet fuel and diesel to countries like Indonesia and Australia, where lockdowns are starting to kick in.
Large regional economies like India and Indonesia have flown under the radar, but they are also the ones at the highest risk as healthcare systems are less equipped than countries like South Korea and Japan where mitigation efforts have been ongoing for weeks.
While Asia should benefit from low oil prices, as they are some of the largest importers of crude, the demand shock to the economy could end up being far more substantial.
"With a population density nearly three times that of China, a weaker health and sanitation infrastructure, and a far less autocratic government, India is acutely vulnerable to a coronavirus outbreak," Ian Bremmer, head of geopolitical consultancy Eurasia Group, wrote on Friday.
So far, India has handled the situation well, he said, with an early ban on foreign travelers, but the challenges going forward will only increase due to a significant risk of misinformation and financial stress offsetting cheap oil, a battered economy and urgency for economic reforms.
China, which accounts for around 10% of global oil demand, saw a nearly 42% drop in oil consumption of more than 4 million b/d in February, when the outbreak hit its peak, according to market estimates.
Asia's developing countries excluding China account for around 14% of global oil demand. If 42% of this demand collapses, it could shave nearly 5.7 million b/d from global oil demand.
The evidence for a massive economic ripple effect is piling up.
Last week, S&P Global Ratings said a "recession across Asia-Pacific is now guaranteed due to a deep first-quarter shock in China and the shutdown of activities across G7 economies."
It cut its economic growth forecasts for China, India, and Japan for 2020 to 2.9%, 5.2% and -1.2% respectively, from 4.8%, 5.7%, and -0.4% previously, saying that the economic blow to China was much harder than most expected.
Asia Pacific countries are accelerating lockdowns by the hour, and transportation fuels--the cornerstone of oil demand--risk being most impacted.
Citigroup's Ed Morse said the decline in global jet fuel and kerosene demand alone could exceed 0.8 million b/d, equal to the total oil demand decline in the 2009 recession.
On Monday, Australia went into full lockdown with the closure of all non-essential services and businesses like clubs and casinos, and curbs on interstate travel. Its domestic refineries import over three-quarters of their crude feedstock, and nearly 60% of refined product consumption is imported.
On Friday, the Indonesian capital of Jakarta declared a state of emergency for the next two weeks with curbs on public transportation.
Indonesia, Southeast Asia's largest economy and the world's fourth most populous country, faces a deteriorating growth outlook due to the coronavirus. Its crude oil import dependency is 35% and refined product import dependency is 40%, according to the oil ministry.
Last week, the Malaysia-Singapore border, one of the world's busiest border crossings with 350,000 people per day was shut, and Singapore itself curbed air travel at what is one of the biggest air transit hubs in the region, hitting jet fuel demand even further.
In Vietnam, low demand for oil products is forcing refineries to cut throughput and lockdowns are spreading across Philippines and South Asia.
Perhaps the biggest wildcard is India, the world's fifth largest economy and third-largest oil consumer after the US and China.
A deceleration in Indian fuel demand growth in 2019 to its lowest since 2013, on the back of a slowing economy and a fall in new cars sales, was enough to drag down global oil demand growth. Indian refineries are key to regional oil and products trade flows.
On Monday, India locked down 75 of its 732 districts until March 31, after a one-day nationwide curfew on Sunday. It has suspended train services except goods supplies, including suburban rail, all metro rail services and inter-state passenger transport; ride-hailing services have also halted operations.
For many Asian this is just the beginning of a long fight ahead.