OPINION: China's novel coronavirus outbreak is another severe jolt to an oil industry already rocked by recent instability in the Middle East.
Energy executives had been looking forward to 2020 with the US-China trade war apparently winding down and global growth still strong.
Opec was keeping oil supply constrained and oil analysts predicted crude prices could rise to average as much as $65 per barrel.
But Brent blend has dropped to around $55 in recent days amid concerns about the impact of the virus on China and the wider global economy.
Wuhan, at the centre of the health emergency, this week remained in lockdown, many international flights cancelled and factories not reopened after the Lunar New Year break.
Work in Chinese offshore ship and fabrication yards has slowed or halted, prompting yards to send out “force majeure” notes warning customers of potential delays.
Wuchang Shipbuilding Industry — in the middle of the epidemic area — reportedly has been shut until further notice, but other yards farther afield have postponed post-holiday restarts.
Any facilities that use quarantined migrant labour from infected Hubei province could struggle for longer.
Oil and gas demand from the world’s biggest importer is expected to dip, with speculation that liquefied natural gas buyers in China could also declare "force majeure" to halt deliveries.
Opec was holding a technical meeting this week in Vienna. There was talk in recent days that Opec and its allies might move up their March meeting to February, to discuss an oil and gas demand problem that may get worse.
This crisis comes at a difficult time for China, which is already facing its deepest economic slowdown in nearly three decades and the fallout from the trade row with the US.
The coronavirus outbreak has coincided with a national holiday when spending is normally high, but concerts and sporting events have been cancelled.
The CSI 300 index of leading Shanghai and Shenzhen-listed shares closed down 8% on 3 February, after the worst opening performance in 13 years.
China... is already facing its deepest economic slowdown in nearly three decades.
Relations between China and the US remain tense, with Beijing accusing Washington of overestimating the scale of the coronavirus epidemic.
As of 4 February, China had 23,718 confirmed novel coronavirus cases and 491 deaths.
The country's coronavirus death rate is already higher than the number of deaths in China caused in 2002 and 2003 by the severe acute respiratory syndrome outbreak. That scare triggered significant economic contraction locally, and this rippled around the world.
But China is far more important now, as it accounts for around a third of global growth.
One of the few side benefits of the trade war has been a move towards new production in the US in a bid to avoid tariffs.
And some manufacturers have already switched their production and shipping from China to neighbouring countries such as Vietnam.
In the meantime, China’s central bank has been pumping money into its own economy to help local companies.
Now, as China enforces drastic measures to contain the coronavirus outbreak at home, the global oil and gas industry is facing its own dose of commercial flu.
(This is an Upstream opinion article.)