While Wuhan, China, may be halfway across the globe, the outbreak of the 2019 novel coronavirus has prompted fluctuations in oil and gas prices, casting future investments in Louisiana into uncertainty, according to LSU Center for Energy Studies Executive Director David Dismukes.
Even before the outbreak, exporters were concerned, says Dismukes, because of the ongoing trade negotiations with China. Now that the coronavirus has essentially closed China’s borders and LNG prices in Asia have fallen to the lowest it’s ever been, Dismukes says companies looking to invest in the industry in Louisiana may delay making their investments or extend their plans.
“A lot of the development in the region is happening to serve southeast Asia and China,” he says, declining to name specific projects or companies that may be affected. “This is going to make things more precarious for projects. … Any project that hasn’t made a final investment decision is at risk. Management and boards are going to want to wait and see what happens.”
As for oil, Dismukes says to expect prices to remain volatile for the next couple of weeks. The market was already looking for a correction, he says, and the outbreak caused that correction to overshoot.
Equity investors were already pressuring companies to put their money toward debt and not back into the drilling rigs for further oil exploration. The current volatile state of prices will underscore that sentiment.
“Don’t be surprised if you see a couple of big drops (in prices),” he says. “Will it rebound? Depends on what happens over there (in China). There will be short-term impacts, but ultimately, I think we’ll be OK.”