Coronavirus flare-ups delay full oil demand recovery
U.S. petroleum consumption has recovered to pre-pandemic levels, but there has been a marked shift from consumer-facing sectors towards industry and freight transportation, mirroring the uneven economic recovery.
The total volume of petroleum products supplied to domestic customers climbed to 20.1 million barrels per day (bpd) in May, according to the Energy Information Administration (“Petroleum supply monthly”, EIA, July 30).
Volumes were down by less than 300,000 bpd (1.4%) from the same month in 2019, before the COVID-19 pandemic, and were actually 200,000 bpd (1.1%) above the pre-pandemic five-year average for 2015-2019.
But continued strong growth in consumption of hydrocarbon gas liquids (HGLs), mostly used in petrochemicals and other industries, has masked an incomplete recovery in fuels supplied to end-users.
HGL consumption reached 3.4 million bpd in May, up from 2.7 million bpd in May 2019, and an average of 2.5 million bpd in the five years before the coronavirus hit.
By contrast, consumption of finished petroleum products was 16.5 million bpd, down from 17.5 million bpd two years earlier and a five-year average of 17.3 million bpd.
Of 1 million bpd of finished consumption lost compared with the final year before the epidemic, half was jet fuel (-0.5 million bpd) with smaller amounts of gasoline (-0.4 million bpd) and diesel (-0.2 million bpd).
Gasoline consumption was down by only 4% from 2019, and diesel down by 6%, but jet fuel was still down by 26%, mostly owing to the sharp reduction in international flights.
Since then, gasoline consumption has continued to rise and is now down less than 2% from the pre-epidemic average, according to high-frequency weekly surveys.
The resumption of aviation, especially long-haul passenger flights, has therefore become critical to the full recovery in petroleum consumption.
The same pattern is apparent in other major oil-consuming areas, including Europe and China, where data is published with longer delays.
This is why the resurgence of the coronavirus in North America, Europe and China, as well as the continuing epidemics across the rest of the world, has had such a strong impact on oil prices.
Governments are unlikely to remove the remaining quarantines and social-distancing controls fully until there are stronger signs that outbreaks are under control and the northern hemisphere winter has passed.
As a result, the expected resumption of widespread long-haul flying, which had already been pushed back from the second quarter of 2021 to the second half, now looks likely to be delayed even further until well into 2022.
Source: Reuters (Editing by David Goodman)