European oil demand markers mixed, deeper lockdown impact on air travel

European oil demand markers have been showing mixed signals, with COVID-19 containment measures further hitting air traffic while land-based mobility edges higher amid a slowing in the pace of infection rates.

With national governments still wary of new COVID-19 strains, travel and activity restrictions remain in place, and have been tightened in some places despite new coronavirus cases in Europe continuing to fall back from recent highs.

European air traffic, a key proxy for jet fuel demand, slipped for the fourth week running in the week to Jan. 27, extending a sharp pull back from a brief rebound in the year-end holiday season, according to tracking data from AirNav.

At London’s Heathrow airport, normally Europe’s busiest air hub, passenger volumes were down 89% year on year in January as travel bans, quarantine requirements, and compulsory testing deterred people from traveling, the airport said Feb. 11, citing a “de facto border closure”.

Compared with 2019 levels, commercial air traffic within Europe was 72.4% lower in the second week of January, the AirNav data showed, little changed from a week earlier.

The declining air traffic came as global airline capacity sank to similar levels as at the end of last June, following muted Chinese Lunar New Year festivities, according to aviation data provider OAG.

In Western Europe, which already has the highest percentage of lost airline capacity globally, seat capacity shrank to 78% below pre-pandemic levels on Feb. 8, according to OAG. In the UK, Europe’s number two economy, seat capacity was just 11% of last year’s level.

S&P Global Platts Analytics estimates that European jet and kerosene demand fell to 440,000 b/d, or less than a third of pre-pandemic levels in December due to ongoing lockdowns in the region.

The recovery in jet demand this year was expected to be slow with demand in February still 745,000 b/d lower than the same month in 2020.

“Given the strict lockdown restrictions in Europe, the outlook for air travel continues to be dim,” Platts Analytics said in a recent note.

German mobility higher

Meanwhile, economic mobility in Europe’s five biggest economies edged higher in the week to Feb 5, according to Google data, despite the ongoing wave of economic lockdowns.

Based on activity at workplaces, retail and recreational sites, and transport hubs, average mobility indexes in France, Germany, Italy, Spain and the UK were 40.7% below pre-crisis levels in the week, according to Google, compared with 42.4% below in the previous week.

Mobility was little changed in France, Italy and the UK, while activity improved week on week in Germany and Spain, the data showed.

Used as a proxy for gasoline and diesel demand, Google measures mobility on the number of visits and length of stay at locations, such as offices, based on mobile phone location data.

European gasoline demand this month is forecast to remain 130,000 b/d lower year on year, according to Platts Analytics.

“As expected, the tightening of restrictions had negative economic effects,” Platts Analytics said in a note. “Essentially, people spent less time at offices and retail establishments.”

Platts Analytics estimated that gasoline and middle distillate demand in the region will recover to average 1.77 million b/d and 5.6 million b/d in 2021, up 13% and 8%, respectively, from 2020 but still below the 1.82 million b/d and 5.74 million b/d seen in 2019.
Source: Platts