The coronavirus outbreak affects not only travel but also the infrastructure of the second-largest economy. Chinese energy experts expect oil consumption in the country to fall by 25% this month.

Heads of some of the country’s largest refineries expect oil demand in the Celestial Empire to shrink by 3.2 million barrels per day in February from a year earlier, a decline that represents more than 3% of global consumption. According to the International Energy Agency, China’s oil demand in February 2019 was just under 13 million barrels per day.

In China, air traffic has stopped almost completely, many cities with millions of residents have been quarantined, and steel and oil refineries have ceased production. It is not yet clear what impact the fight against the spread of coronavirus will have on the Chinese economy. But one thing is clear: China, the world’s largest importer of oil, will need significantly less than expected from commodities earlier this year.

That is why there is a lot of uncertainty on the market. The most important benchmark, the price of Brent oil, is quoted at around 55.72 USD per barrel. Earlier this week, the value of “black gold” reached its lowest level in more than a year. Overall, oil fell by about 20% after mid-January.

“The epidemic has put a huge blow on our company”, a senior refinery manager told. The executive explains that if the spread of the virus peaks in the coming weeks, China’s demand for oil in March could be at least 10% lower than a year ago.

The fall in oil prices has a double impact on OPEC. In many of the Member States of the oil cartel, a state-owned oil company is a monopoly and state budgets depend on the revenue of state-owned corporations. Take Saudi Arabia, OPEC’s largest oil producer, for example. It needs the price of oil to be at least 80 USD per barrel to have a balanced state budget.

At the same time, China is an important customer of OPEC+ oil. It is made up of 24 countries, including the 14 OPEC member states and ten other Allied oil-exporting countries, primarily Russia. The Alliance accounts for about half of the world’s oil production.

The executive director of one of China’s independent refineries told that companies are particularly hard hit by the ongoing epidemic because they have cut the crude oil processing rate by at least half. Daily sales of a number of products, such as heating oil and asphalt, have fallen by 90% since late January, while inventories have increased by more than 50%.

Experts fear the biggest price shock since the economic and financial crisis of 2008 and 2009. Agnes Horvath, а chief economist at the Hungarian MOL oil and gas company, told German Handelsblatt that Chinese daily consumption has already fallen by 20%.

“The future impact will ultimately depend on how the virus spreads and develops”, said she. In the short term, she thinks there is likely to be even worse news for even more pressure on oil prices.

“We see prices just under 50 USD”, said says the chief economist. JBC Energy’s oil expert David Wech is of the same opinion. “Brent prices under 50 USD per barrel can no longer be ruled out, but under 40 USD is very unlikely to fall”.