Coronavirus surge, renewed lockdowns fan fresh worries about global fuel demand

Infections swing upward in top fuel consumer the US, as well as in other major economies such as Brazil and India. (File/AFP)
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Updated 17 July 2020

Coronavirus surge, renewed lockdowns fan fresh worries about global fuel demand

  • Fuel consumption and oil prices had recovered some ground as governments relaxed restrictions on population movements
  • Infections swing upward in top fuel consumer the US, as well as in other major economies such as Brazil and India

LONDON/NEW YORK: Surges in coronavirus infections are slowing a recovery in fuel use from the doldrums of lockdowns in the United States and other countries, raising concern it could be years before consumption rebounds from the impact of the pandemic.
Global fuel demand fell by around a quarter at the peak of the lockdowns, when over 4 billion people worldwide were asked to stay at home. The unprecedented decline in demand forced producers to make record output cuts and pump hundreds of millions of barrels of oil into storage.
Fuel consumption and oil prices had recovered some ground as governments relaxed restrictions on population movements and the output cuts stemmed the glut.
That recovery is stalling, however, as infections swing upward in top fuel consumer the United States, as well as in other major economies such as Brazil and India.
In the week ended July 11, US retail gasoline demand fell 5% from the previous week, according to GasBuddy, which tracks real-time retail gasoline purchases, after several states reimposed restrictions to control outbreaks of COVID-19. Demand also fell the week before, the first time since lockdowns began in March that it dropped for two straight weeks.
“Normally this two-week period would have been the peak demand period and we didn’t get it,” said John Kilduff, partner at Again Capital in New York. “The recovery has been unwinding.”
The surge in US virus cases is happening in some of the most populous states including California, Texas and Florida, which account for more than one-quarter of US gasoline consumption.
US gasoline demand pre-pandemic was around 9 million barrels per day (bpd), or around 9% of global oil supply, according to US government data.
Driving in major US cities with rising infection rates dropped in July, including in Los Angeles, Phoenix, and Miami, according to Dutch location technology company TomTom.
Traffic in Houston, Texas, had recovered in early June, but it has now dropped to where it was at the depth of the lockdown in April, TomTom showed.
The US Northeast, another major fuel-consuming region that took the brunt of the infections in the spring, is coming out of stringent lockdowns cautiously, which is expected to temper gasoline demand.
Elsewhere

Gasoline demand rose nearly 3 million bpd worldwide in June compared with May, the largest month-on-month increase on record, according to the International Energy Agency.
But markets are concerned that some countries could be hit with a US-style surge in cases in later waves of the pandemic.
The Organization of the Petroleum Exporting Countries said a second wave of cases could cause demand to fall by 11 million bpd this year, according to internal OPEC research seen by Reuters. The current expectation was for a year-over-year drop of 9 million bpd.
OPEC already cut supply by a historic 9.7 million bpd to try to bring output in line with lower demand and support prices.
“If the second wave materializes, global oil demand will recover much more slowly in 2021, dragging the pandemic’s market effect further in time,” Rystad Energy analysts said.
Fewer restrictions

India has more than 1 million cases, third-most worldwide, and is seeing a renewed surge in infection after government lockdowns ended in June. Authorities have instituted lockdowns in several states across the country, but not nationwide.
More than 2 million people have contracted coronavirus in Brazil, second-most in the world, and infection rates are accelerating. That nation’s leader, Jair Bolsonaro, has resisted calls for a lockdown, even after he tested positive for the virus.
Australia, Spain, China and Britain are also among some of the major countries to enforce local lockdowns in recent weeks to control outbreaks of the disease.
In the United Kingdom, the government imposed a full local lockdown in Leicester last month because of a rise in coronavirus cases even as nationwide restrictions were loosened. Traffic in Leicester has dropped to April’s level of activity when the nation was under strict lockdown, data showed.


Aramco profits fall in tough quarter, but sees partial recovery from COVID-19 impact

Updated 09 August 2020

Aramco profits fall in tough quarter, but sees partial recovery from COVID-19 impact

  • Aramco see’s “partial recovery” from pandemic impact
  • Aramco president says company remains resilient

DUBAI: Saudi Aramco, the world’s biggest oil company, reported a net income of $6.57bn for the second quarter of 2020, the period which witnessed the most volatile oil market conditions for many decades.

The result, announced to the Tadawul stock exchange in Riyadh where the shares are listed, compared with income of $24.7 bn last year.

Amin Nasser, president and chief executive, said: “Despite COVID-19 bringing the world to a standstill, Aramco kept going. We have proven our financial resilience and operational reliability, setting a record in our business operations, while at the same time taking steps to ensure the health and safety of our people.”

Aramco’s dividend - a big attraction for the investors who bought into the world’s biggest initial public offering last year - will remain as pledged, Nasser added. Cash flow in the quarter amounted to $6.106 bn.

““Strong headwinds from reduced demand and lower oil prices are reflected in our second quarter results. Yet we delivered solid earnings because of our low production costs, unique scale, agile workforce, and unrivalled financial and operational strength. This helped us deliver on our plan to maintain a second quarter dividend of $18.75 billion to be paid in the third quarter,” he said.

Aramco said the loss was “mainly reflecting the impact of lower crude oil prices and declining refining and chemicals margins, partly offset by a decrease in production royalties resulting from lower crude oil prices and a decrease in the royalty rate from 20 per cent to 15 per cent, lower income taxes and zakat as a result of lower earnings, and higher other income related to sales for gas products.”

Sales and revenue in the period - which saw oil prices collapse on “Black Monday” in April - fell 57 per cent to $32.861 bn from the comparable period last year. 

Nasser said he was cautiously optimistic that the world economy was slowly recovering from the depths of the pandemic lockdowns.

“We are seeing a partial recovery in the energy market as countries around the world take steps to ease restrictions and reboot their economies. Meanwhile, we continue to place people’s safety first and have adapted to the new normal, implementing wide-ranging precautions to limit the spread of COVID-19 wherever we operate.

“We are determined to emerge from the pandemic stronger and will continue making progress on our long-term strategic journey, through ongoing investments in our business – which has one of the lowest upstream carbon footprints in the world,” he added.

Aramco expects capital expenditure to be at the lower end of the $25bn to $30bn range it has already indicated for this year.