Chinese oil demand is anticipated to have plunged by about 3Mbpd, equivalent to 20 per cent of its total consumption. China is the world's largest crude oil importer which tantamounts to 14 Mbpd equivalent to combined needs of France, Germany, Italy, Spain, UK, Japan and South Korea.
"The enormous drop is probably the largest demand shock oil market has suffered since the global financial crisis of 2008 to 2009," a Motilal Oswal report said.
While tourism is the obvious victim of the virus outbreak, the report says that the impact on Coronavirus is magnified owing to Wuhan's (the epicentre of the outbreak) geographic importance.
"It is not just movement of people that is curtailed, there are potentially significant consequences for trade since Wuhan is a major river port for freight. Its central location means that consumer goods as well as inputs for manufacturing products could be caught in shipping limbo," the report said.
Chinese authorities confirmed on Tuesday 425 have died in the country due to the novel coronavirus.
Motilal Oswal report said the oil prices can gain support if OPEC+ decides to slash production."The only knight in shining armour in this demand slowdown might be theAOPEC+ efforts as they are weighing their options to the crisis and there have been discussions about calling an emergency meeting this week," it said.
Last month the killing of Iranian Qasem Soleimani by an American drone in Iraq threatened to bring the US and Iran closer to war, pushing Brent to touch $70 a barrel. The Brent fell to $53 a barrel on Tuesday.
"The fundamental outlook for oil market is not constructive, with expectations that the market will return to surplus over 1H20. And as we move closer to March, the market will get increasingly nervous about whetherAOPEC+ will extend its output cut deal through until the end of June," the report said.
( With inputs from IANS )