Drivers speed up recovery in oil demand, but road could be bumpy

Heavy traffic is observed in the Ocean Beach neighborhood of San Diego, California, United States, ahead of the July 4 vacation, July 3, 2020. REUTERS / Bing Guan

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LONDON / NEW YORK / SINGAPORE, Aug. 12 (Reuters) – European and US gasoline stocks have fallen to near pre-pandemic levels as Western vacationers hit the roads, but the end of the driving season and the spread of the Delta variant of the coronavirus could slow the recovery in global oil demand.

The pandemic and the resulting lockdowns around the world destroyed demand for petroleum products and led to massive stocks in 2020 which gradually ran out this year.

The International Energy Agency said on Thursday that global demand for oil jumped 3.8 million barrels per day month-over-month in June, driven by increased mobility in North America and Europe, but reversed course in July and is expected to grow more slowly for the rest of the year due to the release of the Delta variant. Read more

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“International travel is limited so everyone is traveling by car. It’s really a car-driven recovery that is driving down road fuel stocks,” said Cuneyt Kazokoglu, head of oil demand analysis. at FGE.

Global gasoline demand in June was only 3% lower than the 2019 average, according to FGE’s estimate, and demand in the United States, Europe and China has largely recovered or exceeded 2019 levels.

“Government regulations and restrictions are the main obstacles to the recovery in demand at this time. Every time they are lifted, we see pent-up demand and a strong recovery, ”Kazokoglu said.

Successful vaccination programs in North America and Europe – with about half of their populations fully vaccinated according to the Our World in Data project – have meant easing restrictions and a faster and greater reduction in fuel stocks in the world. west of Suez than to the east.

Fuel stocks in Asia, where only about 30% of people are fully vaccinated, remain high overall, as a rapid increase in the number of COVID-19 cases in parts of the continent results in further restrictions on movement.

“It will be interesting to see what happens in the next two months with the fuel demand and the number of Delta cases,” said Lars van Wageningen of Insights Global. “The situation is still volatile in several countries and we cannot say that all are fully recovered.”


The United States consumes about one-fifth of the world’s oil, nearly half of which is gasoline, and it is here that the inventory decline has been the largest.

Gasoline inventories in the United States fell to 227.5 million barrels last week, according to data from the US Energy Information Administration, the lowest since November 2020 and from 233.8 million barrels the same week of 2019, before the pandemic.

The increase in employment and mobility drove consumption to an average of 8.6 million barrels per day (bpd) in the first half of the year, the EIA said, but warned that it expects demand through 2022 to remain below the 2019 average level of 9.3 million bpd. numbers continue to work from home.

Ernie Barsamian, CEO of The Tank Tiger, a U.S. clearinghouse that connects suppliers to available storage, said they had received fewer requests for gasoline and diesel storage.

He blamed an offset market structure in which prices for immediate delivery are higher than those for future shipment, signaling difficult conditions and discouraging storage.

Gasoline at the main Amsterdam-Rotterdam-Antwerp (ARA) storage center fell for the fifth week in a row last week, mainly due to strong exports to the United States and Africa, while the averages Weekly light distillates in Fujairah, the main center of the Middle East, have been well below pre-pandemic levels in recent weeks.


The United States also led the July crude inventory draw, according to FGE.

Inventories in Cushing, Oklahoma, the delivery point for benchmark U.S. crude futures, have fallen for nine consecutive weeks to their lowest since November 2018, government data showed.

Scott Shelton, a US-based energy specialist at United ICAP, noted that July draws were larger than expected as refineries increased production.

But the increase in COVID-19 cases in Asia, coupled with the refinery maintenance season, has reduced crude shipments to the world’s largest importer, China, according to the analysis platform Vortexa.

“The Delta epidemic … in China poses an additional threat to the country’s domestic demand, and in turn refineries,” said Serena Huang, Vortexa’s senior analyst for Asia. Read more

The highly infectious Delta variant has been detected in more than a dozen Chinese cities since the end of July, and local governments have been ordered to fill gaps in control efforts. Read more

However, traders are spying on a silver lining from India, where demand for fuel has skyrocketed as the latest wave of infections subsides.

“Fuel demand in India has recovered quickly now that infections have subsided and restrictions have been lifted… This is also likely to be the case elsewhere, so we see current demand concerns as overblown.” , said Carsten Fritsch, analyst at Commerzbank.

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Reporting by Bozorgmehr Sharafedin in London, Stephanie Kelly and Devika Krishna Kumar in New York, Roslan Khasawneh in Singapore; Editing by Kirsten Donovan

Our standards: Thomson Reuters Trust Principles.

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Felix J. Dixon