China is the biggest winner of the coronavirus-inspired oil plunge

A clear winner has emerged from the historic rout in global oil markets: China, which is reaping an unlikely reward from a crisis it helped foment.

Crude remains trapped in a downdraft of oversupply and the demand shock created by the COVID-19 crisis, with Wall Street roiled for a second consecutive day by sinking oil prices. Weak demand has oil storages filled to near capacity, a condition that’s unlikely to abate as restrictive lockdowns keep businesses closed and citizens mostly indoors.

Yet in a brutal twist of irony, the world’s second-largest economy — where the coronavirus first originated — has become the immediate beneficiary of a catastrophic decline in global demand that’s sent oil prices into a swan dive. On Monday West Texas Intermediate, or U.S. crude, saw its price turn negative for the first time ever, a sign that there’s way more oil than places to store it.

“The biggest winner is China since it is the world’s largest energy importer,” noted research firm Jefferies on Tuesday. “A rough rule of thumb is that a 0.5% drop in oil imports to [gross domestic product] is equivalent to a rise in 0.25% in output.”

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