Chinese oil demand has been estimated to have dropped by 20%, or 3m barrels per day, due to the impact of the coronavirus.
“This is very bad news for OPEC, and Saudi Arabia in particular,” Banchero Costa said.
It noted that Saudi had particular exposure to the Chinese market as US shale production meant it lost the export market it previously had in the US. In addition the US – China trade war has seen China sharply cutting imports of US oil to the benefit of Middle East countries and Saudi.
The shift in trade is demonstrated by a 44.2% jump in Saudi oil exports to China last year to hit 78.5m tonnes. China accounted for 23% of all Saudi total oil exports of 344.6m tonnes in 2019.
“Therefore, any decline in Chinese demand squarely hurts the Saudis more than any other oil exporter. The Saudis put all their eggs in the China basket, and now that basket is looking increasingly fragile, at least in the short term,” Banchero Costa said.
The broker is not, however, expecting long term impact from the coronavirus on Saudi oil exports. “The Covid-19 coronavirus health scare is probably going to fizzle out in 3 to 6 months, just like SARS, H1N1 and MERS did respectively in 2003, 2009 and 2012,” the report commented.
Read all Seatrade Maritime News coverage on the impact of the coronavirus on shipping
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