Awaiting the Coronavirus Impact

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The Coronavirus is causing all manner of concerns across the world, claiming over 1,000 lives amid fears of a global economic slowdown. Nonetheless, we are yet to see an impact on oil flows heading to East Asia.

In January, Chinese waterborne imports held close to the record set late last year, and imports so far in February remain strong:

Loadings bound for East Asia also look stable. The Arab Gulf, West Africa and Latin America – the three leading suppliers of crude to East Asia – all show volumes holding up so far this month. It will take time to see the impact of the coronavirus given that these cargoes were purchased prior to the virus spreading. The true impact on Chinese crude imports may not be seen until well into March – and even then, the picture may be muddied by the fact that bargain-hunting to stock up inventories offsets any import weakness in response to lower refining activity.

While there has been talk of cargo diversions and cargoes being resold, we have seen Chinese crude floating storage being drawn down in recent weeks – a sign of no waning appetite as yet.

While the crude side of the equation chugs along, we are seeing signs of weakness showing up in the products. Chinese clean product exports continue to push higher this month, despite refiners going into maintenance – perhaps signaling that lower demand is manifesting itself in higher exports, rather than higher inventories. Nowhere is this more apparent than in net jet fuel exports, which are holding at a record again this month.