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The anxiety over the Coronavirus (A respiratory infection found in mammals) has caused a significant decrease in the demand for crude oil. Seeing as China is the world’s second-largest consumer of crude oil and consumed an average of 13.5million Barrels Per Day in 2018 and experienced a 5.8% increase, approximately 14.3million Barrels Per Day in 2019 which makes China one of the largest oil-consuming nations in the world. The sudden decrease in their demand has definitely had a negative impact on the price of crude oil as Crude oil has dropped to $60.
The main reason for the decrease in crude oil demand is the transportation ban that has been set in China. There has been a ban on all forms of public transport in Wuhan, China, a city of about 11.08 million people ranging from air travel to rail transportation to buses in an attempt to halt the outbreak of the virus.
The people living in the city have been advised not to exit the city limit by the National Health Commission vice minister, Mr Li Bin and a similar order has been passed to the people living outside the city to not cross the border into Wuhan. Although the World Health Organisation (WHO) has already announced it would not declare the coronavirus as a global emergency yet.
By this time of the year in China the Chinese New Year takes place, a festival that marks the beginning of a new year on the traditional Chinese calendar, the festival is said to have begun over 4000 years ago. Because of this, there is a lot of travel during this period, both domestic and international as this is a time to be spent with family.
The Guinness world’s record announced the Chinese new year as the world’s largest annual human migration in 2010. About three billion trips were to be made for the celebration of the festival which in the past always increased the demand for crude oil in the country. As a result of the travel ban, there was a considerable effect on the demand for crude oil.
The predictions for the fall in oil prices have been made based on the SARS virus outbreak that occurred in China in 2003. The SARS virus (Severe Acute Respiratory Syndrome) is a type of Coronavirus which causes flu-like symptoms and can mutate as it spreads from one person to another. The price of oil fell to nearly 20% during this period.