Spotlight: Asia, excluding China, weak link in the recovery in global oil demand in Q2

Strong points

Asia continued to experience annual growth of 1.7 million bpd in the second quarter, but demand was down 1.1 million from the first quarter

The quarter-on-quarter decline would be even steeper at 1.4 million bpd if China were excluded, while demand in the rest of the world (excluding Asia ex China) increased by 2.8 million bpd. / d. On a sequential basis, Asia, excluding China, was the weakest link in the recovery in global oil demand in Q2

At the start of the third quarter, Asia ex-China is expected to grow only around 620,000 b / d, while the rest of the world is expected to grow by 4.4 million b / d

The situation should improve in the fourth quarter for Asia. Oil demand set to rebound by nearly 1.6 million bpd in 2021, after sharp contraction in 2020

Asia will only account for 30% of global growth in 2021 and 35% in 2022, up from 73% compared to the pre-COVID years of 2011-19

A version of this S&P Global Platts Analytics Spotlight was first published on July 30.

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Year-over-year growth in oil demand in Asia has been held back by the resurgence of COVID-19 in the past two months. Growth weakened to 835,000 b / d in May amid India’s second wave of infections, from 4.3 million b / d in April on a weak basis in 2020. June is estimated to have posted negative growth for the first time since December 2020 as due to tighter COVID-19 related movement restrictions in Southeast Asia, as well as other countries like Japan, South Korea and the Australia. Asia saw year-on-year demand growth of 1.7 million bpd in the second quarter, mainly due to weak 2020 base.

Demand from Asia in Q2 was down 1.1 million from Q1. The quarterly drop would be 1.4 million bpd if China is excluded. The rest of the world has seen demand increase by 2.8 million bpd as many countries have started to reopen their economies. Chinese demand increased 305,000 bpd over the same period. On this basis, Asia ex-China was the weakest link in the recovery in global oil demand in the second quarter.

At the start of the third quarter, Asia ex-China is expected to grow by around 620,000 b / d, while demand from the rest of the world is expected to increase by 4.4 million b / d. Thus, the recovery in oil demand in Asia is expected to remain uneven in the short term. In terms of the manufacturing PMI, India rebounded strongly but fell below the level of 50 in June, indicating that the manufacturing sector has contracted. The PMIs of a few other countries have also fallen below the 50 level, including Malaysia, Thailand and Vietnam, amid the pandemic. For many countries, the service sector has been hit even harder by the strict social distancing measures.

In terms of driving activity, the weighted mobility index for Asia excluding China averaged 106% of pre-COVID levels in July, up from 98% in June, driven by the improvement in India. Southeast Asia’s mobility index fell from 94% of pre-COVID levels in April to 72% in July. The Indian index improved from 57% in May to 150% in July. Japan’s mobility has also been affected by the state of emergency measures in the country, but reached a new high amid the ongoing Olympics before slowing down in the past two days.

There has been a decline in driving activity in Australia recently due to another outbreak due to the Delta variant of the coronavirus, with the index falling to 92% of pre-COVID levels in July, down 21 points percentage from the recent peak in April.

The outlook for Southeast Asia in August remains worrying as COVID-19 continues to rise in some countries. Daily infections in Indonesia started to decline after peaking at more than 56,000 on July 15, but cases remained high.

Malaysia hit a record new COVID-19 cases on July 29, with 17,408 infections. Malaysian authorities ended the tightened movement control order and easing measures in most places, including the capital Kuala Lumpur and Selangor state, on July 20, despite the increase in cases. in the country.

Thailand reported a daily record 17,669 new coronavirus infections on July 29, even as the government imposed tougher lockdowns in the capital Bangkok and 12 high-risk provinces, suspending most domestic flights and expanding the curfew area.

In Northeast Asia, Japan and South Korea also recorded new highs in the past two days.

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However, the situation is expected to improve for Asia in the fourth quarter, leading to annual growth of 1.6 million bpd, after a sharp contraction in 2020. Asia will continue to be heavily dependent on China and China. India in 2021, with the two countries contributing 67% of regional growth. Asia will only account for 30% of global growth in 2021 and 35% in 2022, up from 73% compared to the pre-COVID years of 2011-19.

Nonetheless, the demand recovery in Asia will remain the fastest of any region despite the current weakness in Southeast Asia and Northeast Asia, with the region’s demand in 2021 falling by 0.8% from 2019 levels. The pace of vaccine deployment in Asia has accelerated in recent months. Many developed countries in the region like Japan and South Korea do better than the global average in the percentage of the population fully or partially vaccinated against COVID-19. Many developing countries, including those in Southeast Asia, are still lagging behind but are making efforts to get more vaccines in the second half of the year, so we still hope that there will be robust growth later in the year. S2 with the expansion of the vaccination campaign in the region.


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Felix J. Dixon