Business News
How Coronavirus would affect crude oil demand negatively
The demand for crude oil might be significantly affected by the coronavirus which recently broke out in China.
The demand for crude oil might be significantly affected by the coronavirus, which recently broke out in China. The disease, which has gradually been spreading from the Asian country to the United States and United Kingdom, could result to a fall of 260,000 crude oil barrels per day.
The new projection and warning came from the Senior Commodity Strategist at Goldman Sachs, Damien Courvalin. The impact is linked to the jet fuel market as air travelling from Asia might reduce due to the coronavirus.
Coronavirus
“Ultimately we expect jet fuel markets — including cracks, regrade and Asian differentials — to decline most if this outbreak persists given the likely decline in regional air travel,” Courvalin said.
Some analysts disagree with Goldman: While Goldman Sachs believes the drop will be as projected, other analyst at Energy Aspects, a London-based consultancy firm, think the fall in crude oil will not be significant. Their reason was due to countries not taking the same action taken during the SARS crisis in 2002-2003. Countries at that time were compelled to issue restrictions on travel and trade.
“While the SARS outbreak was estimated to have impacted up to 0.26 mbpd of oil demand globally, according to anecdotal reports, we currently do not expect global oil demand to fall significantly as a result of the coronavirus,” Energy Aspects said in a research note.
Voluntary trip cancellation expected: Energy Aspects might not expect huge impact on the crude oil market but it didn’t rule out the possibility that some countries might cancel air trips voluntarily even though the disease has largely been in China, with minor cases reported in US and UK.
[READ MORE: Crude Oil: Nigeria’s oil production slips for the third consecutive month)
“The World Health Organisation is currently hesitant to declare the coronavirus a public health emergency, meaning airline cancellations remain unlikely.” So, the coronavirus might not negatively impact jet fuel as projected in some quarters.
What’s the worst-case scenario? Despite not fully backing a significant impact on transportation fuel, Energy Aspects said jet fuel demand growth could slow to 20,000 bpd year-on-year if China takes more aggressive approach in curbing the disease.
According to the firm in a report by Punch, “In a worst-case scenario that assumes the outbreak spreads across the nation, we expect jet demand growth to slow to 20,000 bpd year-on-year after having grown by 75 thousand bpd year-on-year in H2 2019.”
Countries’ coronavirus currently affects: Apart from the US and the UK, two more countries in the Asian continent, Japan and South Korea have been battling with the virus which came from China’s Wuhan, a capital with 11 million people. Already, 17 deaths and 582 cases have been confirmed, leading to the shutdown on Wuhan and some other cities by the Chinese government.
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ABCON asks CBN to check impact of cryptocurrencies on diaspora remittances
The association also noted that the apex bank needs to address other issues driving the patronage of cryptocurrency exchanges for remittance transfers.
The Association of Bureau De Change Operators of Nigeria (ABCON) has asked the Central Bank of Nigeria (CBN) to introduce measures that will neutralize the positive effects of cryptocurrencies as a channel for diaspora remittances.
This is to redirect diaspora remittances away from cryptocurrency exchanges to official channels and also protect such against potential disruptions.
This call was made by ABCON during its Quarterly Economic Review for the first quarter of 2021 where it commended the CBN for the N5/$ rebate scheme introduced to encourage diaspora Nigerians to use official channels to remit their funds.
However, the association noted that the apex bank needs to address other issues driving the patronage of cryptocurrency exchanges for remittance transfers.
READ: Nigeria among worst countries to start a career, and they all don’t accept crypto
What ABCON is saying in their statement
The association in its statement said, “It is noteworthy that public acceptability for cryptocurrency exchanges are rising which could be quite accountable for the wide drop in diaspora inflows to Nigeria. Insecurity in the country is giving it greater prominence as investors and citizens are finding Cryptocurrency a safe haven for their wealth in case of any eventuality.
In most Emerging Markets Bitcoin transfers surged last year, as the pandemic exposed the cheaper and more efficient digital remittance services. Migrants sending money across borders to their families prefer the minimal transaction costs of cryptocurrency exchanges against the exorbitant costs of traditional money transfer companies like Western Union.”
READ: Atsu Davoh is building ways for Africans to easily acquire and spend cryptocurrency
According to ABCON, “Cryptocurrency transactions are faster than the conventional transfers, which require passing through banks reliant SWIFT, the sluggish, half-century-old interbank messaging system that handles cross-border payments.
These exchanges override the political complications of official channels. The global reach of cryptocurrencies avoids the inflation risk inherent to official currencies, especially in politically unstable countries reliant on fickle foreign investors.
Thus, while we commend the efforts of CBN in introducing the package of Five Naira for One Dollar transfer, it can be seen from the analysis above that the challenges exceed just non-payment of foreign currency by the IMTCs and the exchange rate. Strategies that satisfy the most sensitive of these advantages of Cryptocurrency exchanges must be introduced to redirect flows to the official channel.”
ABCON also expressed concerns over the country’s huge unemployment rate, urging the government to apply radical approaches with the use of both conventional and unconventional economic and political tools to redress the trend.
READ: Afreximbank President reveals ways Nigeria can boost diaspora participation in economy
What you should know
- It can be recalled that the apex bank had about 2 months ago, warned the Deposit Money Banks, Non-Financial Institutions and other Financial Institutions against doing business in crypto and other digital assets.
- The CBN directed financial institutions to immediately close the accounts of persons or entities transacting in or operating cryptocurrency exchanges, warning of severe regulatory sanctions in the event of any breach of the directive.
- The Securities and Exchange Commission (SEC) had a few days ago, revealed that it is working with the CBN for a better understanding and regulation of cryptocurrencies in the country.
