The reduction in Chinese oil demand as a result of the coronavirus has taken its toll on African exports.
West African exports to China were 1.1 million barrels per day in February, according to OilX, down by 400,000 bpd from 2019 volumes. This was also below the five-year average, of around 1.25mn bpd.
The outlook for Angolan supplies to China in March look even bleaker. Angolan March trading has been slow, the analytics company reported, with just over 70% of the programme traded. The 12-month average for trading at this point in the month is for 80% to have been traded.
IHS Markit estimates Chinese demand has dropped by more than 1.4 million barrels per day from 2019 levels.
Big Chinese traders are trying to re-sell cargoes of crude where possible, IHS Markit’s liquids lead analyst Fotios Katsoulas said. “The decline in China’s oil demand … has led to a slowdown in spot crude purchases from incremental supply sources such as the North Sea, Brazil, Baltic and West Africa with buyers taking minimum term contractual volumes,” he continued.
One factor helping provide some support for prices is the absence of Libya from the market. The North African state’s civil war took around 1mn bpd offline in mid-January.
The impact on loadings is becoming clear, with the consultancy’s Commodities at Sea tool suggesting “a decline of around 15% against levels of normal activity”. The true extent of the impact on Chinese imports will become clearer in March, particularly into the second half, he said.
Reduced Chinese demand has taken a toll on prices. Brent reached $55.93 today, below Ghana and Nigeria’s benchmark price for the year of $62.6 per barrel and $57 respectively, close to Angola’s budget price of $55.
The US Energy Information Administration (EIA) has predicted that liquids demand will average 900,000 bpd less than it had forecast in January. This reduction was driven by the coronavirus impact, in addition to the warm winter temperatures. Over the year, it reduced its demand increase to 1mn bpd, down by 300,000 bpd from its prediction in January.