Oil prices have fallen as fears spread that the coronavirus outbreak, mainly concentrated in China, will hurt demand. In response, Saudi Energy Minister Prince Abdulaziz bin Salman said that he is monitoring the situation, and believes that it will have a "very limited impact" on comsumption, according to Bloomberg.
“The current impact on global markets, including oil and other commodities, is primarily driven by psychological factors and extremely negative expectations adopted by some market participants despite its very limited impact on global oil demand,” he said in a statement.
He likened the reaction to the coronavirus outbreak to the "extreme pessimism" that hit the market in 2003 during SARS, which he said "did not cause a significant reduction in oil demand."
Using the 2003 SARS outbreak as a reference, Goldman Sachs estimated that oil demand could drop by 260,000bpd on the coronavirus outbreak, with oil prices dropping by around $3.
"The timing could not have been any worse with the outbreak occurring days before the beginning of the Chinese New Year when hundreds of millions of workers travel home to visit their families," said Ole Hansen, head of commodity strategy at Saxo Bank. "With several cities in lockdown and many events cancelled, the Chinese economy is likely to take an economic hit during the first quarter."
Because the outbreak is occuring during the Lunar New Year, when many Chinese people travel home to celebrate, a drop in travel would likely impact jet fuel demand and would hit demand forecasts.