Global oil demand is being destroyed as the coronavirus forces people around the world to remain indoors and avoid all unnecessary travel.
More than two-thirds of the world’s population are in lockdown, meaning no one is driving, flying or doing much that would use crude or its derivatives.
The ramifications for the oil market are huge, with refiners, producers and even petrostates all facing uncertain futures. The most immediate set of data from America starkly illustrated the impact. On Wednesday, the U.S. Energy Information Administration reported U.S. drivers consumed the least amount of gasoline for at least 30 years, as normal life ground to a halt.
Demand for crude could fall by 27 million barrels a day this month, according to Norwegian research firm Rystad Energy, while Trafigura Group estimates the current hit to consumption is around 35 million barrels a day.
U.S. oil demand has fallen to 14.4 million barrels a day, the lowest in data going back to 1990 and a drop of more than 30 percent from pre-crisis levels, government figures showed Wednesday. In its short-term outlook, the EIA forecast the hit to oil demand will be 16.7 million barrels a day in April. A number of U.S. refiners, including HollyFrontier and Marathon Petroleum, cut run rates by 30 percent.
Crude demand in the world’s third-biggest consumer has collapsed by as much as 70 percent as India endures the planet’s largest national lockdown, according to officials at the country’s refiners. Consumption for the entire month could average about 50 percent below last year’s levels but that’s based on India’s three-week lockdown ending April 15 as planned, according to the officials. That’s 3.1 million barrels a day of lost oil demand, according to data compiled by Bloomberg.
Oil refineries in China, the world’s biggest crude importer, may increase processing rates to near last year’s average levels this month, providing a glimmer of hope to a global market reeling from the virus. Meanwhile, processing at private refiners, known as teapots, will continue to ramp up with some idled plants set to resume in April, Chinese industry researcher SCI99 said. Wuhan, the epicenter of the coronavirus pandemic, officially re-opened on Wednesday after being locked down for almost four months.
In Spain, one of the countries hit worst by the disease, oil product demand fell by 23 percent in March, according to BloombergNEF. Air and road fuel consumption were the most affected, with gasoline and road diesel falling by 35.5 percent and 26.5 percent respectively. Demand for kerosene, predominantly consumed in the aviation sector, fell 42.5 percent as aircraft remained grounded across much of the country. Spain has extended its lockdown until April 25.
Italy, which with Spain imposed some of Europe’s harshest restrictions on movement, is also expected to extend its lockdown from April 13. With the nation under strict restrictions of movement, retail fuel sales have plunged 85 percent, according to service station union estimates. The country’s refiners risk permanent supply-chain disruption if the country’s lockdown runs into June and companies stockpile crude and reduce production, industry lobby FederPetroli Italia said.
Sales of gasoline and diesel in the U.K. were down by 66 percent and 57 percent respectively, as of March 31, according to the U.K. Petrol Retailers Association. Britain’s top supermarket, Tesco, said gasoline sales were down 70 percent over the “last weeks” following the U.K. lockdown.
A survey of Dutch car dealers, driving schools and transport companies revealed that respondents had lost almost half of their revenue because of the coronavirus and about 80 percent may need to seek additional credit within three months. “The Netherlands really has come to a standstill,” said Bovag spokesman Tom Huyskens. “Only those that really need it are driving, filling up their tank, but otherwise traffic has pretty much stopped.”