Daily Management Review

Global Fuel Demand Worries Rise Over Surge In Covid-19 And Fresh Lockdowns


Global Fuel Demand Worries Rise Over Surge In Covid-19 And Fresh Lockdowns
A recovery in fuel demand globally from the lows hit during the height of the novel coronvirus pandemic is being slowed by the surges in coronavirus infections. Concerns are being raised by analysts about a recovery of fuel demand and consumption to pre crisis levels could take years. 
At the peak of the pandemic more than 4 billion people were forced to stay indoors because of lockdown imposed by governments to prevent the spread of the pandemic which resulted in global oil demand falling by about a quarter. That record decline in demand also forced producers to impose record cuts in production and shift to storage hundreds of millions of barrels of oil.
In recent weeks, with some governments slowly allowing economic activities to return, there has been some recovery in oil consumption and oil prices, aided by the propping up of prices by the output cuts.
However that recovery is slowing down again with n uptick in infections in some of the major oil consuming countries including the United States and some of the major economies such as Brazil and India.
According to GasBuddy, which tracks real-time retail gasoline purchases, after restrictions to control outbreaks of Covid-19 were imposed in several states of the US, there was a 5 per cent drop in retail gasoline demand in the country in the week ended July 11 compared to the previous week. There had also been drop in demand in the previous week which made it the first two consecutive weeks that noted a drop in demand since lockdowns began in March.
"Normally this two-week period would have been the peak demand period and we didn't get it," said John Kilduff, partner at Again Capital in New York. "The recovery has been unwinding."
Some of the most populous states in the US including California, Texas and Florida, is witnessing a surge in virus cases. These states account for more than a quarter of the total gasoline consumption in the country.
According to U.S. government data, about 9 per cent of the global oil supply, or about 9 million barrels per day (bpd), was the demand for gasoline in the US prior to the pandemic hit.
According to the International Energy Agency, in the month of June, there was a growth in demand for gasoline by about almost 3 million bpd globally compared to the previous month. 
However the threat that some major oil consuming countries could be hit by rise in pandemic infections in later waves has caused concern in the global oil market. 
According to the oil cartel Organization of the Petroleum Exporting Countries (OPEC) research and as reported by the media, it expects a fall in demand by 11 million bpd this year in the case of a second wave of Cvoid-19 pandemic. Previously, the OPEC had estimated that the drop in demand for oil for the current year would be at 9 million bpd.
"If the second wave materializes, global oil demand will recover much more slowly in 2021, dragging the pandemic's market effect further in time," Rystad Energy analysts said.