Thread on the 3 mb/d decline in China's oil demand reported by Bloomberg:
1- The 3 mb/d is the difference between the expected level in normal circumstances vs. actual level after the virus. But the decline now relative to 2 weeks ago is way smaller
1- The 3 mb/d is the difference between the expected level in normal circumstances vs. actual level after the virus. But the decline now relative to 2 weeks ago is way smaller
2- The estimates include the increase in demand because of the holidays. Even if it is correct, it is taking a peak of about 10 days to make that statement.
3- China does not publish oil demand data. Experts and analysts have to calculate "implied demand" from various data that are released monthly. Companies can see data related only to their business.
This makes the statement about a decline of 3 mb/d a guesstimate at best
This makes the statement about a decline of 3 mb/d a guesstimate at best
4- No one knows the exact decline in oil demand. All we have is estimates. Some estimates are based on hard work: calculation of canceled flights, trains, buses, the number of tourists, closed shops, stores, and factories, supply chain impact, previuos events, etc
5- Other estimates are just throwing words in the wind, just like the -3 mb/d statement in the story. It is useless, yet sensational.
6- It is clear from the story that they are mixing demand and consumption. Consumption is NOT demanded. Consumption might decline by more than demand. Demand = Consumption + change in inventories.
7- The irony is, some Chinese refiners planned maintenance months ago. Taking advantage of lower demand, they want to expand the maintenance
Using the logic of the quoted -3 mb/d, only the additional maintenance MUST be counted as part of the impact of the#coronavirus!
Using the logic of the quoted -3 mb/d, only the additional maintenance MUST be counted as part of the impact of the#coronavirus!
8- In the end, the decline in China's oil demand means that the promised purchases of US oil are not going to happen. But remember the following: the first victim of the oil price drop in 2015 was Chinese oil wells! Lower oil prices might lower China's oil production
9- Sinopec announced way before the #coronavirus its planned maintenance at 5 of its refineries in Feb and March. It planned partial maintenance at its 360 kbd Maoming refinery in Feb. It planed partial resistance in March on 3 refineries with a total capacity of about 1 mb/d
10. Sinopec also planned full maintenance at its 100 kbd Beihai refinery.
Other companies had maintenance plans too,
So, do not be fooled by news of cutting crude runs because of the #coronavirus. However, we might see additional maintenance because of it
Other companies had maintenance plans too,
So, do not be fooled by news of cutting crude runs because of the #coronavirus. However, we might see additional maintenance because of it
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