BEIJING/SINGAPORE/NEW YORK - The coronavirus's effect on energy markets is worsening, as the sharp fall in demand in China, the world's largest importer of crude, is stranding oil cargoes off the country's coast and prompting shippers to seek out other Asian destinations.
Chinese refineries have cut output by about 1.5 million barrels per day over just two weeks, causing crude stocks to pile up. Oil storage tanks in China's eastern Shandong province are nearing peaks seen last June as independent refiners slash processing rates, industry sources said. "In theory, there is a lot of spare capacity to fill, but we have never seen this full utilization" of storage, said Kpler analyst Alexander Booth, adding that utilization rates are currently at 61% in Shandong, versus 63% at last year's peak.
Freight rates meanwhile, have plunged to nearly half the levels they were at as the virus has hit demand and after the U.S. partially lifted sanctions on one unit of Chinese shipping firm COSCO. "We still have around 30% of space at our oil storage at this moment, which is already a lot better than the previous weeks, as truck drivers are gradually returning to work."