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:

also read

France, Germany to agree to NATO role against Islamic State - sources
| Reuters
World

France, Germany to agree to NATO role against Islamic State - sources | Reuters

By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States

China's Xi says navy should become world class
| Reuters
World

China's Xi says navy should become world class | Reuters

BEIJING Chinese President Xi Jinping on Wednesday called for greater efforts to make the country's navy a world class one, strong in operations on, below and above the surface, as it steps up its ability to project power far from its shores.China's navy has taken an increasingly prominent role in recent months, with a rising star admiral taking command, its first aircraft carrier sailing around self-ruled Taiwan and a new aircraft carrier launched last month.With President Donald Trump promising a US shipbuilding spree and unnerving Beijing with his unpredictable approach on hot button issues including Taiwan and the South and East China Seas, China is pushing to narrow the gap with the U.S. Navy.Inspecting navy headquarters, Xi said the navy should "aim for the top ranks in the world", the Defence Ministry said in a statement about his visit."Building a strong and modern navy is an important mark of a top ranking global military," the ministry paraphrased Xi as saying.