Business Briefs | Financial impact of virus outbreak
Virus outbreak blamed for forecast fall in oil demand
The International Energy Agency expects demand for oil to fall in the first quarter as a result of the virus outbreak that emanated in China. Any fall would represent the first quarterly decline in a decade.
The Paris-based agency said Thursday in its oil market report for February that demand in the first quarter was expected to fall by 435,000 barrels per day compared with the same period a year ago. The agency also cut its 2020 demand growth forecast by 365,000 barrels per day to 885,000.
The agency said that the consequences of the outbreak for oil demand “will be significant”
While the brief SARS epidemic of 2003 has at times been used as a reassuring point of comparison, China’s economy has changed enormously since then. Its oil demand has almost doubled since 2003 and represented more than three-quarters of global oil demand growth last year.
The outbreak of the disease, which has been named COVID-19, from the city of Wuhan threatens to disrupt supply chains that are central to the global economy.
The IEA said that in addition travel to and from China has increased, raising the chance that the disease will spread.
EU monitoring economic impact of virus outbreak
The European Union warned Thursday that the spread of the viral outbreak in China is a risk for the economy but that its full impact will depend on how long it lasts and how far it spreads.
The European Commission, the bloc’s executive arm, said in its winter economic forecast that “the baseline assumption is that the outbreak peaks in the first quarter, with relatively limited global spillovers.”
The longer the outbreak, which has been named COVID-19, lasts, the higher the likelihood of “knock-on effects” through lowered business optimism and tougher access to credit around the globe.
Elsewhere in its forecast, the commission predicted stable growth of 1.2% this year and next in the 19 countries that use the euro as their currency. For the full 27-member European Union growth is expected to ease to 1.4% this year and next from 1.5% last year.
Economy Commissioner Paolo Gentiloni said that it’s too early to make an assessment.
But he added: “What is sure is … that the global importance of the China economy will produce an impact.”
The spread of the virus has led to prolonged shutdowns at Chinese plants that are important for the global economy and to reductions in travel.