Global oil demand has improved over the past few weeks, led by China’s demand which has rebounded to 90 percent of its pre-coronavirus levels, while tentative signs of improvement emerge in other major economies, including the United States and India, as lockdowns are eased.
In China, oil demand was at 90 percent of the pre-COVID-19 levels in April, and was expected at 92 percent of ‘normal’ demand in May, according to data from IHS Markit.
“The brisk resumption of Chinese oil demand, 90 percent of pre-COVID levels by the end of April and moving higher, is a welcome signpost for the global economy. When you consider that oil demand in China—the first country impacted by the virus—had fallen by more than 40% in February—the degree to which it is snapping back offers reason for some optimism about economic and demand recovery trends in other markets such as Europe and North America,” said Jim Burkhard, vice president and head of oil markets, IHS Markit.
According to Wood Mackenzie, China’s oil demand is set to recover to 13 million barrels per day (bpd) in the second quarter of 2020, up by 16.3 percent from Q1.
“China’s demand for gasoline and diesel are expected to increase YoY from Q3 2020 onwards,” the consultancy said at the end of May, adding that eased lockdowns and preference for commuting in personal vehicles will push gasoline demand to a quick recovery and it is likely to return to last year’s levels by June 2020.
India’s fuel demand, which had crashed by 60 percent during the early days of its two-month lockdown, is set to reach pre-coronavirus levels in June, Indian Oil Minister Dharmendra Pradhan said last week.
In the United States, average national gasoline prices rose last week, and part of the increase can be attributed to higher gasoline demand, which saw a 7-percent week-over-week increase, AAA said earlier this week.
“Americans are slowly but steadily returning to driving, causing gas prices to increase across the country,” AAA spokesperson Jeanette Casselano said.
By Tsvetana Paraskova for Oilprice.com
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The proof is that oil demand in the world’s three biggest consumers is virtually returning to pre-COVID-19 levels with China hitting 92% of normal demand in May and India set to reach normal demand level by June with the United States’ gasoline demand rising by a 7% week-over-week increase.
Oil prices could be projected to hit $45-$50 in the second half of this year and touch $60 in early next year.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London