The Conoravirus (COVID-19) has infected world oil demand. The remedy that would cure the impact proposed by OPEC members would be to cut production of 1 million barrels a day. Adding the possibility of cutting an additional 500,000 barrels for non-OPEC countries but participating in the declaration of cooperation, tines and such as Russia.
The measure would end on June 30 to gauge the impact during the first and second quarters of 2020. It is expected that the measure’s compliance will not be complete, but also a moderate adherence to the reduction would stabilize the market at the end of the second quarter. If the demand reduction continues to the third quarter, they would review the extent of the measure.
WoodMac estimates that demand fell 2.7 million b / d in the first quarter of which 2.3 million b / d is from China.
Tanker ship market
The lifting of sanctions against Cosco Shipping Tankers (Dalian) by the USA increased the capacity of the market. This, in turn, suffered the reduction in demand by China and the new IMO emissions regulation 2020 of the International Maritime Organization has plummeted the daily earnings of tankers, especially the (VLCC) ultra-giant oil tankers by the switch to better quality, less polluting fuel.
Average daily VLCC earnings were $ 23,797 per day on February 7, having dropped from $ 94,286 per day in early January. At the beginning of February, Suezmax earnings amounted to $ 33,756 per day and Aframax to $ 22,036 per day, according to BIMCO.
However, the cuts by OPEC would have less impact than the revolution of fracking or Shale Oil of the United States, which generated a constant excess of oil supply to the market, analysts from BIMCO assure.
Crude oil tankers, according to BIMCO, should focus on imports since most of what entered China remained as a strategic inventory for the country.