SARS outbreak may cloud Big Oil's prospects long into future

May 2, 2003, 11:48PM By JOSEPH A. GIANNONE Houston Chronicle-Reuters News Service

NEW YORK -- The global travel slump and a potential slowdown in Asia's economies prompted by the deadly SARS virus could cut into energy companies' earnings in the second quarter and beyond, analysts and industry executives said.

Severe Acute Respiratory Syndrome has claimed nearly 400 lives since spreading from China in March.

Efforts to avoid and contain the disease have crimped travel and tourism and shut down factories and office buildings in China and Hong Kong.

Industry analysts say demand for oil and refined fuels will suffer, sapping profit growth at Exxon Mobil Corp., ChevronTexaco Corp. and ConocoPhillips -- all global oil companies with big refining and marketing businesses in Asia.

"SARS has reduced airplane travel, reduced jet fuel demand and affected the economy," said analyst Lowell Feld of the U.S. Energy Information Administration, referring to China.

Energy companies, which posted record first-quarter profits amid soaring oil and gas prices, already face a period of falling prices.

The war in Iraq ended with little damage to oil facilities, and fears of disruptions in Venezuela and Nigeria have eased.

Yet companies face the prospect of reduced sales of jet fuel, gasoline, natural gas, chemicals and power in Asia, according to Lysle Brinker, an oil analyst for John S. Herold.

OPEC President Abdullah Al-Attiyah, Qatar's oil minister, estimated last week that SARS will reduce oil demand by about 300,000 barrels per day.

If the 2-month-old downturn persisted, SARS could erase much of Asia's projected economic growth. J.P. Morgan Chase has warned the virus may not be brought under control until June.

China's economy, once expected to expand by 8 percent, now may shrink by 2 percent in the second quarter.

It had been slated to consume an additional 100,000 barrels per day this year, according to Energy Information Administration estimates.

"The demand side of the picture is in big trouble because of the high energy prices we've experienced the past few months and SARS' impact on demand in Asia," said Fimat USA analyst John Kilduff.

The airline industry, a major consumer of jet fuel and other oil products, has been hard hit.

Industry group IATA in March said trans-Pacific flights were down 12 percent and Europe-to-Asia flights fell by 15 percent.