Fuel demand will not return to 2019 levels until 2024
BAKU, Azerbaijan, May 29
By Leman Zeynalova – Trend:
Fuel demand will not return to 2019 levels until 2024 as the global recession sows an uneven recovery as economies experience varying lockdown measures and diverging infection rates, Trend reports citing Fitch Solutions.
“Our global team forecast a 3.2 percent decline in 2020 global GDP which will weigh heavily on fuel demand, cap oil prices and limit near-term investment in new supply. The outlook for average fuel growth for the decade ahead falls well below the rough average of 1.0mn b/d of growth per year shown historically. The back half of our forecast shows a stronger average rate of fuel demand growth of nearly 850,000b/d,” Fitch Solutions said in its report.
The rebound in global fuel demand will be led by the return of economic activity, although the company currently forecasts a bumpy and desynchronised recovery.
“The winners and loser economically will dictate which markets return fuel demand fastest. Some of the factors that will hamper a faster rebound will be due to changes in consumer choice. For example, the desire to maintain social distance may ease as the prevalence of cases continues to fall opening a return to large gatherings and confined spaces including public transport and airplanes,” reads the report.
However, Fitch Solutions notes that in China and South Korea, two major markets which eased lockdown measures first, declines in public transportation continue remain well below 2019 levels as workers continue chose to drive to work where possible.
Aviation fuel has been the hardest hit of the refined fuel demand categories due to Covid-19 and will likely take the longest to recover.
“The closure of international borders and flights bans from early infection hotspots saw global demand for aviation plummet quickly in Q1 2020. IATA reports the fall in air traffic in March was nearly 50 percent in most markets. Jet fuel as part of the transportation sector was previously expected to be a key driver for future fuel demand growth, accounting for 6.3 perceny of total fuel demand in 2019,” said Fitch Solutions.
“Due the impacts of Covid-19 and the setbacks faced by airlines, a previously expected a bullish expansion of air travel, looks unlikely in the mid-term view. When lockdown measures in China were eased in late February/early March, domestic flights remained nearly 70 percent below the previous year’s levels of passenger. Two month later in late May, passenger numbers have improved but are still 50% lower than at the same point in 2019.”
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