European lockdowns weigh on global fuel recovery

By Bozorgmehr Sharafedin, Stephanie Kelly and Florence Tan LONDON/NEW YORK/SINGAPORE (Reuters) - Renewed restrictions in Europe and the United States to combat the coronavirus have slowed the pace of fuel demand recovery, offsetting a rebound in Asian economies where consumption has almost returned to pre-COVID levels. As the second wave of the virus hit many Western countries, governments imposed new lockdowns, closing restaurants and bars and banning gatherings

Reuters November 11, 2020 00:06:45 IST
European lockdowns weigh on global fuel recovery

European lockdowns weigh on global fuel recovery

By Bozorgmehr Sharafedin, Stephanie Kelly and Florence Tan

LONDON/NEW YORK/SINGAPORE (Reuters) - Renewed restrictions in Europe and the United States to combat the coronavirus have slowed the pace of fuel demand recovery, offsetting a rebound in Asian economies where consumption has almost returned to pre-COVID levels.

As the second wave of the virus hit many Western countries, governments imposed new lockdowns, closing restaurants and bars and banning gatherings. But the measures were not as strict as during the first wave.

France, the United Kingdom, Spain and Poland were under the strictest lockdowns in Europe, according to the Oxford stringency index, which assesses indicators such as school and workplace closures and travel bans.

Graphic: Renewed restrictions in Europe and the United States https://fingfx.thomsonreuters.com/gfx/ce/qzjvqoqqmvx/OXFORD.JPG

As a result, traffic in London, Paris and Madrid fell sharply in November after a peak in October, according to data provided to Reuters by location technology company TomTom for mobility until Sunday evening.

"For now, we expect roughly a drop in European oil demand of around one million barrels per day (bpd) month on month in November, where approximately 80% of this drop can be attributed to the lockdown impact and the rest to monthly seasonality," said Rystad Energy's head of oil markets, Bjornar Tonhaugen.

November road demand is usually lower than October.

Graphic: Renewed lockdowns weigh on Europe's mobility https://graphics.reuters.com/GLOBAL-OIL/rlgvdamljpo/chart.png

The IEA director for energy markets and security, Keisuke Sadamori, told Reuters the renewed lockdowns in Europe appeared set to push the outlook for global oil demand toward the downside, though less severely than in the first round of lockdowns in April.

Analysts said that promising news on Pfizer's COVID-19 vaccine candidate, which pushed up oil prices by 10% on Monday, is unlikely to affect demand destruction in Europe through to the end of the year but could delay stricter restrictions in the United States.

Restrictions in Europe were worrying the U.S. market, with some traders viewing lockdowns there as a harbinger for what is to come in the United States.

"We are just waiting for the other shoe to drop here," said John Kilduff, partner at Again Capital in New York. "This is looking like a replay of earlier in the year."

The market was tacitly optimistic about the U.S. fuel market’s recovery in late August – just as some schools were reopening – but positive sentiment has since evaporated.

Product supplied of gasoline – a proxy for demand – has dropped 9% since August, to 8.3 million bpd from 9.2 million bpd, Energy Information Administration (IEA) data showed.

ASIAN RECOVERY

The IEA's Sadamori said the direction of the oil market varied from one country to another.

"It's basically negative in the OECD side, in particular Europe and probably some parts of North America, while East Asia and particularly Chinese demand growth has been pretty impressive. I think China can be the only major country that achieves year-on-year growth," he said.

Traffic in the Chinese capital of Beijing has recovered significantly from the baseline in February and was not far from 2019 levels, TomTom data shows.

Fuel demand in China, the world's second-largest oil consumer, has returned to pre-COVID levels and was set to grow this year as its economy rebounded.

SIA Energy, a Beijing-based consultancy, said it expected Chinese oil demand to grow 9%, or 1.34 million bpd, in 2020 to 16.4 million bpd.

In Moscow and Tokyo, road traffic was not far from pre-pandemic levels, according to TomTom data.

Graphic: Traffic in Beijing on recovery https://graphics.reuters.com/GLOBAL-OIL/jbypreokkve/chart.png

India suffered immensely from the pandemic, but the mobility indicators in the country also remained resilient. Traffic in New Delhi and Mumbai was still on the rise, but at a slower pace than in the July-August period, TomTom data showed.

India's gasoline and diesel sales in October have also risen above pre-pandemic levels.

Oil Minister Dharmendra Pradhan said at an industry conference on Monday that the consumption of high-speed diesel and motor spirit in October exceeded levels in the same month last year. 

"We anticipate that this recovery path in energy demand growth in India will sustain in the coming months," he added.

(Reporting by Bozorgmehr Sharafedin in London, Stephanie Kelly in new York and Florence Tan in Singapore, additional reporting by Noah Browning in London and Nidhi Verma in New Dehli; Editing by Nick Macfie and David Goodman)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date:

TAGS:

Find latest and upcoming tech gadgets online on Tech2 Gadgets. Get technology news, gadgets reviews & ratings. Popular gadgets including laptop, tablet and mobile specifications, features, prices, comparison.

also read

Global Markets: Stocks ascend to record on economic recovery, vaccine outlook
Business

Global Markets: Stocks ascend to record on economic recovery, vaccine outlook

By Chuck Mikolajczak NEW YORK (Reuters) - A gauge of global stocks hit a record and oil prices jumped on Monday as the newest positive data for a potential COVID-19 vaccine and signs of economic recovery in Asia boosted sentiment. U.S. stocks advanced, with the Dow Industrials setting a record as it neared the 30,000 mark for the first time, after pharma company Moderna said its prospective vaccine was 94.5% effective in preventing the illness, which has crushed economies across the globe

Airbnb IPO filing shows third-quarter earnings beating virus with cost cuts, new focus
Business

Airbnb IPO filing shows third-quarter earnings beating virus with cost cuts, new focus

By Anirban Sen and Joshua Franklin (Reuters) - Airbnb Inc's initial public offering (IPO) registration showed on Monday that the home rental startup turned a profit in the third quarter despite the COVID-19 pandemic, as it gears up for one of the most anticipated stock market debuts in recent years. The filing, published ahead of Airbnb's anticipated stock market debut in December, showed a dramatic recovery in its fortunes, after the coronavirus outbreak dragged down its core home rental business during the first half of the year. The slump forced it to lay off 25% of its workforce in May, suspend marketing activities for the year and seek $2 billion (£1.5 billion) emergency funding from investors, including Silver Lake and Sixth Street Partners, at a valuation of $18 billion

Biden says U.S., allies need to set global trade rules to counter China's influence
Business

Biden says U.S., allies need to set global trade rules to counter China's influence

By David Lawder WASHINGTON (Reuters) - U.S. President-elect Joe Biden said on Monday the United States needed to negotiate with allies to set global trading rules to counter China's growing influence but declined to say whether he would join a new China-backed Asian trade pact signed on Sunday.