1. China bouncing back
- China imposed the strictest lockdown at the start of the pandemic, and “has so far reaped the biggest rewards,” Bank of America Merrill Lynch wrote in a report.
- China’s GDP contracted by 6.8 percent year-on-year in the first quarter, and rebounded by 3.2 percent year-on-year in the second. For the full year, China’s economy is on track to expand by 2 percent, while the Eurozone will see an 8.2-percent contraction and the U.S. will see an 8-percent contraction.
- In June, when Beijing reported a sudden uptick in cases – 330 total – the government responded swiftly. Mass transit ridership contracted by 50 percent and air traffic plunged by 80 percent for three weeks.
- There are many risk factors for the spread of Covid-19 – age, health, urbanization, globalization – but Bank of America says mobility is one of the most important risk factors, and that governments will likely continue to restrict it. The bank forecasts global mobility will need to decline by another 15 to 25 percent if the R factor is to fall below 1.0.
- “In turn, oil demand could fall by at least an additional 3mn b/d beyond our current base case of a 2.7 mn b/d YoY contraction,” the bank said.
2. Refining margins out of negative territory, but still low
- Refiners cut back processing severely when margins plunged into negative territory earlier this year.