The novel coronavirus, a variant of the virus that caused SARS and MERS, was first identified in Wuhan in Hubei province, China, in December 2019. By 3 February 2020, 361 people had died and there were 17,200 confirmed cases in China, according to the UN News website https://news.un.org/en/story/2020/02/1056562. On 31 January, the number of cases had already exceeded the total number of SARs cases reported over the entire scope of the epidemic. On 30 January, the WHO declared a global health emergency. At the same time, the body did not recommend closing all borders as official migration will ensure better control than unofficial migration.
Blame it on the Bats
As Julianna LeMieux reported on 31 January in the publication, Genetic Engineering and Biotechnology News, after the disease was linked to a seafood market in Wuhan, and there were some reports of links to snakes, Chinese scientists have been able to determine through genomic analysis that the novel coronavirus, nCoV-2019, is linked to bats. This is not too surprising since SARs and Ebola have also been linked to bats. Why bats? Bats live close together in large groups, are unusual amongst mammals in their ability to fly, which enables the virus to travel, and they have high body temperatures, which allow the virus to live in them without killing them. The high level of diversity in the bat population may also contribute to the reasons for bats being more likely than other animals to host diseases that are eventually passed on to humans.
What about the Economy?
On 3 February, the first trading day after the Lunar New Year holiday, the China stock market plummeted by around 8% amid virus fears, the worst day in over four years. The Chinese government already expects that GDP growth will drop from the expected 6% to 5% this quarter, while Q2 will see 6% restored -- many observers think this is optimistic. There will be repercussions throughout Asia, and the coronavirus outbreak has spread to more than a dozen other countries, causing stock markets around the world to weaken. The global economy has felt the reverberations with the drop in crude oil prices one of the notable signs of weakening. The worry is that the economic impact could exceed that of the SARs epidemic in 2003 as the scale of this outbreak has already exceeded that of SARs in numbers of people who have been diagnosed with the disease. The total estimated cost of the SARs epidemic was $40 billion, according to a report published in 2004 by the Institute of Medicine (US) Forum on Microbial Threats. https://www.ncbi.nlm.nih.gov/books/ NBK92473/. So far, this new outbreak of the Coronavirus is not being defined as an “epidemic” but as an “outbreak.” It appears to be less deadly and there are, as yet, few cases outside China. The world is watching and waiting and most Chinese markets are still holding their breath after the long Lunar New Year holiday turned into a forced break from work based on the need to contain a new strain of coronavirus.
What is the impact on energy and petrochemical markets?
Mostly, it is just too soon to say. However, the markets have already absorbed some of the pessimism which has naturally emerged from this worldwide health threat.
Crude oil markets have responded to the cuts in demand for jet fuel as flights are cancelled and grounded between several European and North American countries with China.
Prices dropped about 15% in January, hitting $51.58/bbl for WTI on 31 January and dropping a further $1.48/bbl to reach $50.10/bbl by 3 February.