A resurgence of coronavirus cases in many parts of the world over the next few months will be the main hurdle to global demand for gasoline and diesel recovering to pre-pandemic levels by the end of 2021, according to senior executives at oil firms and commodity traders.
“A second wave or a continued set of outbreaks that has an impact on demand is ... the most likely shock that the oil market needs to be considering in the next 12 to 24 months,” Giovanni Serio, global head of research at oil trader Vitol, said at the virtual Asia Pacific Petroleum Conference (APPEC), as carried by Reuters.
Many executives expect diesel and gasoline demand to return to pre-COVID-19 levels by the end of next year, but how the pandemic will pan out is the major unknown in forecasts and a significant risk to the downside in case of many localized lockdowns.
The industry professionals continue to be pessimistic about the recovery in jet fuel demand, which is expected to probably take up to three years to return to pre-crisis levels.
According to the industry executives, refiners should recalibrate their product output away from jet fuel, if possible. In addition, the industry as a whole should be ready to have storage space available to keep excess oil and oil products if the demand recovery continues to wobble with uncertainties in the pandemic.
One of the top independent traders, Trafigura, expects a “supply-heavy” market through the end of this year, with inventories building by the end of 2020 as demand recovery stalls.
The market will get worse before it gets better, Ben Luckock, Co-Head of Oil Trading at Trafigura, said on the conference on Monday, as carried by Bloomberg. The oversupply on the market is reaching the point where chartering tankers for floating storage becomes profitable, according to Trafigura’s executive.
By Charles Kennedy for Oilprice.com
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