Global oil and fuel prices are picking up as demand returns to pre-pandemic levels amid easing coronavirus lockdowns in key countries like China and India and signs of increasing road travel in several countries.
Gasoline prices in Asia, Europe and the United States all scaled 1-year highs this week, while benchmark global crude oil Brent futures topped $60 per barrel for the first time in a year.
The firmer prices are welcome news after the oil sector suffered its worst ever demand contraction in 2020, encouraging traders to drain brimming storage tanks to ease a supply glut.
There are, however, questions over how quickly refiners with idled capacity can respond to increased demand. Analysts say the recovery pace will vary by region and fuel type, and that jet fuel demand will remain the weakest performer until more international air travel resumes.
In its outlook on Thursday, the Organization of the Petroleum Exporting Countries (OPEC) noted that current oil demand levels were still “lagging” prior forecasts – an observation that knocked prices – but are expected to pick up in the second half of 2021.
The International Energy Agency (IEA), in a separate forecast on Thursday, said it expected demand to rise strongly later this year.
ASIA FIRST
Asia Pacific gasoline demand is expected to recover to 2019 levels by the end of the first quarter, following the region’s return to pre-COVID gasoil consumption levels in late 2020, said Max van der Velden, principal analyst at Wood Mackenzie.
“This is primarily driven by China which has managed the pandemic very well,” van der Velden said. “We forecast the impact of renewed Chinese lockdown measures that restrict mobility to be short-lived.”
An accelerating shift from public transport to personal cars is also bullish for China’s gasoline demand, he said.
Recovering industrial activity in India – the second largest net oil importer behind China – has also tightened supplies of diesel, or gasoil, across Asia, which is usually a net exporter of the fuel.
-REUTERS