In fact, Poten & Partners highlight that it is highly uncertain at this point how the virus outbreak, which started in the city of Wuhan in China and has spread across several countries in Asia and the world, will further develop and what the implications will be on the Chinese as well as the global economy.

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It is said that the speed with which the virus spreads; how contagious and lethal the virus is- as well as the speed and effectiveness of the response of the Chinese government and the World Health Organization will all have an impact.

Poten & Partners stress that the oil market has already traded down as concerns about the coronavirus are mounting and although the tanker market remains strong, rates have started to weaken. Although such events may not necessarily be connected, it seems that the "market psychology is turning negative."

In order to illustrate the potential impact of the outbreak on the global economy and the oil markets in particular, several analysts have used a previous coronavirus outbreak, the 2003 SARS epidemic, as a guideline.

Yet, as Poten & Partners stress- the main differences between 2003 and 2020 are the size of the Asian economies and its regional energy demand, as

China has experienced dramatic growth in the intervening period.

In 2003, China’s oil demand was about 5.8 Mb/d, as compared to 13.6 Mb/d in 2019. China’s net oil imports in 2003 were less than 2 Mb/d.

In 2020, China is expected to import five times as much, and currently imports more than 10 Mb/d of crude oil and is by far the largest oil importer in the world.

Any impact on Chinese and Asian oil demand is likely to be much more significant, not only in volume terms, but also in terms of oil import flows and the ripple effect on the tanker market.

It is said that Goldman Sachs used the 2003 SARS outbreak as a reference case to model the potential impact of the coronavirus outbreak on the oil and jet fuel markets.

Namely, they estimated a 260 Kb/d decline in oil demand, primarily driven by a 170 Kb/d drop in jet fuel demand, although gasoline demand would be impacted as well. Oil prices would fall by $3.00/barrel.

The SARS epidemic in 2003 pushed oil prices down nearly 20% and created significant fear and uncertainty.

However, the fear ultimately subsided as the pace of new reported cases slowed. The recovery of economic activity and oil demand was swift and strong. Poten & Partners notify that

If the current crisis follows a similar pattern, we may see short-term headwinds followed by a strong rebound later this year.

It is said that what will be happening over the next two to four weeks is likely critical in determining how severe the crisis will become. The virus has already spread beyond Wuhan and extensive Lunar New Year travel could dramatically expand the scope of the epidemic within the country and beyond.