How is Coronavirus affecting the oil market?

How is coronavirus affecting the oil market you might ask. Well, China’s reaction to Coronavirus was initially to close down the cities and most would say rightly so. As a result, the shutdown of factories and the radical reduction of flights, has certainly justified the significant drop in oil prices.

China is the world’s largest importer of crude oil, of which they usually consume around 14 million barrels a day. (1 barrel=159L, so that’s 2 quadrillion litres a day!!!) Therefore their needs have dramatically declined to power machinery, fuel vehicles, and keep the lights on.

It is not just China who is using less oil. As airlines around the world suspend their flights & travel restrictions creep in the amount of jet fuel will decrease too.

But how do we expect coronavirus to affect oil prices to change over the next few months?

The main question to ask is whether the hysteria surrounding the Coronavirus has caused the oil demand forecasts to change considerably.

Many in the industry believe that if the epidemic dies out sooner than thought, then the Chinese oil demand has the potential to recover fully by the end of the year. In turn this would give a small reduction in the global oil market. Meaning your current price of home heating oil is unlikely to change dramatically.

It is worth considering that as the weather warms over the next few months, we would likely see a decrease in the coronavirus. Just as we do in England with the winter flu. This is not necessarily taken into account by the current forecast.

So far we have seen crude oil hit its lowest level in a year after it fell 20% from its January peak. This is the equivalent amount that the UK & Italy consume together. As a result this has shown the industry there is a strong link to coronavirus.

crude oil price, oil price drop due to coronavirus

Source: BBC News

What are oil producers expected to do about the Coronavirus impact?

The world’s largest oil producers are discussing more production cuts, on top of those which have been in place since 2016. The aim of this is to boost falling prices. Opec members have called for measures to support oil prices as the coronavirus continues to hit demand.

What does Coronavirus mean for your home heating oil price?

Well of course it is difficult to say, but we have been monitoring prices. Although the price has decreased since January it has remained relatively stable ever since. As we recover from Coronavirus and the oil market evens out, we would naturally expect an increase in price provided no additional epidemics take place.

oil price graph for Yorkshire

Source: Oil 4 Yorkshire