ECONOMY
Fitch Ratings: Coronavirus could push global oil market into surplus
![Fitch Ratings: Coronavirus could push global oil market into surplus](/files/2020/1/1200x630/15808230625671954831_1200x630.jpg)
Baku, February 4, AZERTAC
The coronavirus outbreak could curb oil demand growth if it continues to spread, leading to an extended production surplus as production grows in Brazil, Norway and the US, Fitch Ratings says.
In a statement Feb 3, Fitch said the surplus magnitude will depend on the duration of the outbreak and the ability of OPEC+ countries to adjust production levels, if required.
“We expect oil prices to remain highly volatile in 2020, with geopolitical tensions and economic sentiment being other key drivers,” it said.
Fitch said oil prices have been under pressure since the start of the coronavirus outbreak with Brent crude falling from just under USD70 a barrel in early January to about USD56/bbl in early February.
The ratings agency said that in a scenario of materially lower oil prices than assumed in its price deck and weaker market sentiment it could become more challenging for the 'B'-category oil and gas issuers to access capital markets, potentially resulting in a higher default rate in the sector.
Fitch said Asian refiners could see further softening of refining margins due to lower demand and utilisation rates.
It added that oil demand losses are difficult to estimate at this stage, but would come from a combination of reduced air travel, lower domestic road transportation and a longer-than-expected halt of manufacturing activities.
It said the Chinese authorities have extended the Lunar New Year holidays and quarantined about 50 million people living in the Hubei province, which remains the hardest hit.