Oil and Gas Supply Demand Severely Hit By Virus Outbreak
The outbreak of the Coronavirus is the only thing that is worrying the world’s oil demand and supply at the moment. According to media reports, oil prices have slid by almost 25 percent in 2020. This has been solely because of a lower demand and slower expected economic growth that has left major oil producers worried and insecure of the future.
According to an Oslo based industry consultancy Rystad Energy, the pandemic level of outbreak, could cut oil industry investment this year by tens of billions of dollars and could further delay the delivery of offshore installations currently being built at Asian yards.
Qatar’s is an example of a country that had already withheld its infrastructure expansion plans in supply of natural gas to the rest of the world. This had been initially decided over possible war like conditions between the US and Iran but now, the coronavirus scare has replaced the fear of a pandemic outbreak.
It is further being estimated that lower oil prices could lead to oil and gas companies scaling down their flexible investment budgets, especially shale operators in the United States as well as some offshore exploration and production players, confirmed Audun Martinsen, head of Rystad’s oilfield service research.
Further, it is being estimated that the virus outbreak could lead to postponement of deliveries of oil platforms and other equipment from yards by at least three to six months, due to shortages of staff or supplies, as well as travel bans. Out of 28 floating production, storage and offloading vessels (FPSOs) under construction, 22 are being built in China, South Korea and Singapore, according to Rystad.
Currently, the virus that has started to spread to other parts of the world is spreading rapidly and no cure has been found to curtail it as of now. Also, Saudi Arabia, the biggest producer in The Organization of the Petroleum Exporting Countries (OPEC), and some other members have already agreed on an output cut of 1 million barrels per day (bpd) for the second quarter of 2020, more than an initially proposed cut of 600,000 bp.
The OPEC countries and its allies including Russia, a grouping known as OPEC+, have already been curbing oil output by 1.7 million bpd under a deal that runs to the end of March.
“Experts do not yet know when the effects of the epidemic will ease, but one thing remains clear: the situation will worsen in March and the impact of the virus is not limited to Chinese fabrication yards – it affects the entire global service industry,” Rystad has forewarned.