Monday, February 24, 2020
 
Columnist
Martin Hennecke

Oil demand to fall 25pc as virus threatens world economy
 
13/02/2020
 
A study predicted that global demand for oil will drop by 25 percent, while Federal Reserve chairman Jerome Powell warned the coronavirus will threaten the United States and the world economy. The novel coronavirus will significantly limit the growth in world oil demand this year compared to earlier forecasts, Norwegian consultancy Rystad Energy predicted. Rystad predicts global oil demand will increase by 820,000 barrels per day in 2020, down 25 percent from a December forecast of 1.1 million bpd. Powell said the US central bank is keeping a close eye on fallout from the deadly virus outbreak in China, singling it out among risks threatening the United States and world economy. Powell stopped short of saying the outbreak had changed the Fed's baseline outlook for the US economy, or the expectation among many members of the Federal Open Market Committee that rates will remain on hold this year. The market estimated the Fed will cute rates in the third and fourth quarter. The Fed will implement more easing measures if the novel coronavirus outbreak worsens, David Chao, Global Market Strategist for Asia Pacific(Ex-Japan) at Invesco said. The low-interest-rate global environment and the increased liquidity will be beneficial to risk asset investments. Invesco expected Hong Kong to be among the worst hit markets in Asia. Hong Kong and Thailand will be hit most by the virus, as their economies are mainly driven by mainland tourists. The Hong Kong hospitality industry will be hit due to the drop in visitors. There may be some fluctuation in the Hong Kong property market, but performance will remain strong driven by low-interest-rate environment. The electronics industry, especially export-orientated supply chains like Taiwan and Korea, will also take a hit.

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