Barclays sees $2 per barrel impact to oil prices as coronavirus fears threaten demand

Barclays said the actual economic fallout from the coronavirus could be less severe than the 2003 SARS outbreak. (AFP)
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Updated 28 January 2020

Barclays sees $2 per barrel impact to oil prices as coronavirus fears threaten demand

  • More than 100 people have died and over 4,000 cases of the new virus have been confirmed in China
  • Barclays expects the OPEC and other allies to step in and take further measures to keep the markets tight

BENGALURU: Barclays said on Tuesday oil prices will be impacted by $2 per barrel on the potential economic fallout from the coronavirus outbreak in China.
More than 100 people have died and over 4,000 cases of the new virus have been confirmed in China, leading authorities to increase preventive measures, impose travel restrictions and also extend the Lunar New Year holidays to limit the spread of the virus.
The bank sees a $2 per barrel downside to their full-year Brent and WTI forecasts of $62 per barrel and $57 per barrel, respectively.
Compounding the effects of the spillover to economic growth from China and the region, Barclays expects transitory oil demand erosion of about 0.6-0.8 million barrels per day (mb/d) in the first quarter of this year, or 0.2 mb/d for the full year.
“If air passenger traffic in China declined by half in first quarter of 2020, it would likely lead to a 300,000 barrels per day year on year decline in jet-kerosene demand from China,” the bank said adding the fall in road transport would likely be less severe than in the past given reduced reliance on buses.
Barclays expects the Organization of the Petroleum Exporting Countries and other allies to step in and take further measures to keep the markets tight, in case the fall in demand is more acute.
Oil prices have been down for the last six sessions, but the bank said that the market reaction was likely overdone.
Barclays said the actual economic fallout from the coronavirus could be less severe than the 2003 SARS outbreak, given that the new virus seems less lethal than SARS so far and the measures taken by Chinese authorities.
The bank said the geopolitical risks to global supplies remain high as US-Iran tensions could continue to gradually escalate and oil production in Libya could fall further if the blockade of key infrastructure facilities continues.
Brent crude prices are currently trading around $59 per barrel and US WTI at around at $53 per barrel.


Japan receives first shipment of blue ammonia from Saudi Aramco, SABIC

Updated 28 September 2020

Japan receives first shipment of blue ammonia from Saudi Aramco, SABIC

JAPAN: Saudi Aramco and Japan’s Institute of Energy Economics (IEEJ) announced the first shipment of blue ammonia from Saudi Arabia to Japan on Sunday.

The shipment, which was in partnership with Saudi Basic Industries Corporation (SABIC), contained forty tons of high-grade blue ammonia, and is meant for use in zero-carbon power generation.

Saudi Aramco said in a statement that shipping challenges were overcome with 30 tons of CO2 captured during the process designated for use in methanol production at one of SABIC’s facilities and another 20 tons of captured CO2 being used for enhanced oil recovery at Aramco’s field.

Mitsubishi Corporation, which is representing IEEJ’s study team, is working with SABIC to monitor the transport logistics in partnership with JGC Corporation, Mitsubishi Heavy Industries Engineering, Mitsubishi Shipbuilding Co and UBE Industries.

“The shipment is considered the first around the world, and it represents a crucial opportunity for Aramco to introduce hydrocarbons as a reliable and affordable source of low-carbon hydrogen and ammonia,” said Ahmad Al-Khowaiter, Chief Technology Officer, Saudi Aramco, according to Saudi media.

Fahad Al-Sherehy, SABIC’s Vice President of Energy Efficiency and Carbon Management, also said: “At SABIC, we can economically leverage our existing infrastructure for hydrogen and ammonia production with CO2 capture. Our experience in the full supply chain along with integrated petrochemicals facilities will play an important role in providing the world with the blue ammonia.”

Ammonia can help supply the world’s increasing demand for energy through reliable and sustainable methods. 

The Saudi-Japan blue ammonia supply network involved a full value chain; including the conversion of hydrocarbons to hydrogen and then to ammonia, as well as the capture of associated carbon dioxide emissions.