Some of the world’s biggest oil consumers, led by China, have already exceeded pre-pandemic consumption levels, Bloomberg reports, citing consultancy SIA Energy.
“The worst for Asian fuel demand is over and we see a soft recovery of oil demand in the coming months,” SIA Energy analyst Sengyik Tee said, noting that he expected a 13-percent jump in Chinese oil consumption in the fourth quarter of the year—and not from a year ago but from 2019, before the pandemic started.
U.S. demand for oil is also on a solid rebound thanks to mass vaccinations during the summer. Earlier this month, demand hit the highest since the start of the year despite rekindled concern as Covid-19 case numbers climb higher.
Yet, the demand forecast is not the same for all fuels that drive overall oil demand higher. According to SIA Energy, for instance, China’s 13-percent oil demand growth in the fourth quarter will be driven by a 20-percent surge in gasoline demand. On the other hand, jet fuel demand will only inch up by 4 percent in the period.
Demand for oil in India is also on the mend, and strongly, as people opt for personal transportation in the wake of the latest lockdowns. This trend is likely to drive a surge in gasoline demand this fiscal year, which will, in turn, lead to a substantial increase in imports as India relies on foreign oil for the bulk of its needs.
The strong recovery of oil demand across the world’s three largest consumers has driven oil prices around 40 percent higher since the start of the year, according to Bloomberg. Downside risk remains clear and present because of the latest wave of Covid-19 infections, especially in densely populated countries such as India and Indonesia, a Wood Mac analyst told Bloomberg.
On the other hand, the fact that in parts of the world, demand for fuels already exceeds pre-pandemic levels suggests that the appetite for oil remains healthy despite the downside risk.
By Charles Kennedy for Oilprice.com
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And while concerns about a resurgence of COVID linger, the fundamentals of the global oil market are robust enough to overwhelm a new resurgence.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London