The coronavirus has hobbled travel, supply chains, and global economic growth forecasts. Oil will pay the price.

Norway’s biggest independent energy consultancy Rystad Energy predicted on Thursday that The coronavirus outbreak will cut growth in global crude oil demand by more than half this year compared to earlier forecasts. (Reuters)

Rystad now forecasts that global oil demand will grow by only 500,000 barrels per day (BPD) in 2020, much lower than a February forecast of 820,000 barrels per day (BPD) and a December outlook of 1.1 million BPD.

Oil prices to crumple with demand?

The bearish impact of the virus on oil prices forced OPEC the same day to slash its oil output by an additional 1.5 million BPD during Q2 2020 to prop up prices.

Paris-based International Energy Agency (IEA) is also planning to scale down its oil-demand forecasts next week to account for the spreading impact of the virus. “I am going to announce it Monday morning in Paris,” IEA chief Fatih Birol said in Washington, also on Thursday. “The impacts are already severe mainly because the transport sector is heavily affected.” He also said the virus was “negatively affecting global economic activity.”

Adding doom to the gloom, IHS Markit has predicted the biggest decline in history of 3.8 million barrels a day in global oil demand in the first quarter of 2020 over the prior year. It also said that oil consumption in 2020 will be lower than last year even in case of a recovery in the second half.

Crude oil – Will $42 hold?

In the chart below, crude oil is within handshaking distance of its 5-year old support line in the region of $42-$42, marked in green.

If this support line were to be broken, crude oil could crash much lower.

Crude oil-tracking ETFs may go under

Crude-oil ETFs have already been slammed, but there could be potentially further downside given the deteriorating outlook for the commodity. Here are oil ETFs that may come under further pressure.

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Crude oil Chart credit: Macrotrends.net