Rystad Energy severely downgrades oil demand forecasts amid coronavirus

Rystad Energy severely downgrades oil demand forecasts amid coronavirus

BAKU, Azerbaijan, March 13

By Leman Zeynalova - Trend:

The forecast for global oil demand now projects a decrease of 0.6 percent, or 600,000 barrels of oil per day (bpd), year-on-year, Trend reports with reference to Rystad Energy, an independent energy research and business intelligence company.

“Our estimates show that total oil demand in 2019 was approximately 99.8 million bpd, which is now projected to decline to 99.2 million bpd in 2020,” said the company in its report.

“This is a severe downgrade compared to previous estimates and takes into account the quarantine lockdown in Italy, massive cancellations of flights by airlines, the travel ban between Europe and the US that was announced yesterday, and our simulations of the virus’ growth patterns this year.”

Rystad Energy believes that global demand for road fuels will stay largely flat, in contrast to previous projections of growth.

“Road fuel demand in 2019 is estimated to have reached 49.7 million bpd. Prior to the coronavirus we expected this demand segment to grow to 50.3 million bpd in 2020, but we now see it reaching only about 49.8 million bpd,” reads the report. “Almost all of this reduction will occur due to reduced road traffic in the first half of 2020. In China alone, demand for gasoline and diesel road fuel was down by about 1.5 million bpd in February. Traffic in the country is now gradually returning to more normal levels.”

In Europe, the company expects a rising number of cities to implement quarantines and travel restrictions, in addition to those already in place in Italy.

“From this, we assume peak impact will be half of what was seen in China in terms of volume of reduced demand. However, it remains to be seen whether quarantines in Europe will last longer than those implemented in China,” reads the report.

In the US, Rystad Energy assumes an impact equal to half of what will be seen in Europe, with a one-month lag.

“In the rest of Asia, including Japan, South Korea, India, and South East Asia, we assume the impact will be 20 percent of the impact seen in China, with a one-month lag. The same level of impact is assumed for the rest of the world, but with a two-month lag.”

As for jet fuel demand, as a base case Rystad Energy assumes that the common summer air travel peak will occur later in the season.

“Our estimates are that the global daily flight count in the first quarter of 2020 will be 8,000 flights lower than pre-coronavirus forecasts. For the second quarter, the reduction is projected to be 50,000 daily flights, dropping to 31,000 in the third quarter and 13,000 in the fourth quarter. As a base case, we now see jet fuel demand falling by 11 percent year-on-year, equating to 780,000 bpd. Last year’s demand for jet fuel was seen at about 7.2 million bpd.”

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Follow the author on Twitter: @Lyaman_Zeyn

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