The effect of the spreading coronavirus has so far been “marginal,” according to U.S. Energy Secretary Dan Brouillette, and longer term impacts depend in large part on the actions of the Chinese government.
“If they are able to contain the virus, perhaps you won’t see quite the slowdown that people are anticipating,” Brouillette said Friday at the Atlantic Council in Washington, DC. “If it does continue, if it creates a contagion and it moves across China as well as around the world, then obviously, we’re going to be concerned about Chinese economic growth.
“But at this point in time, I think what they’re doing seems to strike us as appropriate. I’m not commenting on the tactical methodology of how they do it, but they seem to be able to have some understanding and control over the virus, or at least the initial efforts have been successful.”
The response by the rest of the world, including restrictions on air flight in and out of China, could also have major impacts on energy markets, Brouillette said.
“If flights stop altogether, then obviously you start to see the secondary effects — demand on jet fuel — that affects the energy pricing around the world as well.” Another “important component” is what members of the Organization of the Petroleum Exporting Countries, aka OPEC, decide to do at a meeting reportedly scheduled this week.
“My understanding is that they’re going to meet to discuss this issue,” he said of OPEC. “I think their decision is going to have an impact across the world. I don’t think that it’s going to be a dramatic impact…I think they may have some decision made within the next 14 days that will lead us to understand clearly what the energy markets will do.”
The outbreak in China is cutting into liquefied natural gas (LNG) demand, exacerbating a supply glut that’s dogged the global market on a steady flow of production and warm winter weather in the Northern Hemisphere. Oil prices also continued to move lower as last week came to a close.
China National Offshore Oil Corp.’s decision to declare force majeure and refuse some contracted LNG shipments because of weak demand and the virus sent another bearish signal to the global market last week. Meanwhile, quarantines, travel restrictions and requirements that vessels allow 14 days to pass before they enter ports in some parts of the world could disrupt global shipping.
An ongoing trade war with the United States has found few LNG cargoes leaving the shores of Maryland and the Gulf Coast for China, the world’s second largest buyer of LNG behind Japan.
The World Health Organization (WHO) said Monday there were 40,235 cases of the coronavirus — officially named COVID-19 — in China, with 909 confirmed deaths from the disease. There were another 319 cases in 24 other countries, and one death reported, WHO said.
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