Rystad Energy: "Modelling a second Covid-19 wave: Oil demand in 2020 could lose another 2.5 million bpd"

From Rystad via Hellenic Shipping News, July 6:

As the number of confirmed new Covid-19 cases surges to new global highs of beyond 200,000 per day, a second wave of the pandemic is increasingly apparent in several countries – most notably in the United States. Modelling the effect of a wider ‘second wave’ scenario, Rystad Energy finds that global oil demand in 2020 could be knocked down to 86.5 million bpd, compared to our current base-case estimate of 89 million bpd.

In the second wave scenario, we don’t expect the oil demand impact to be as strong as was seen in the first outbreak, as restrictive measures will be limited to particular regions and sectors. We would expect these “smart lockdowns” to lower the negative demand impact, so as not to repeat the absolute low of 73.7 million bpd in April. The maximum negative demand impact in April 2020 was -26 million bpd, and the peak month in the second wave could come close to this at -18 million bpd, compared to the levels projected prior to the pandemic. We will be revisiting and updating these assumptions as data becomes available.

North America (notably the lower US states), the Middle East and Southeast Asia will be hit relatively harder, Rystad Energy’s modelling shows.

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The rise of Covid-19 cases in the US is of particular concern for the oil market given the country’s high oil consumption under normal circumstances, as this second wave could paralyze road fuel demand. In China, the authorities’ response to the recent case resurgence in Beijing shows that re-imposing radical lockdown measures is still a viable option.

“Covid-19 will also re-emerge in other regions in our ‘second wave’ scenario when the flu season starts in the northern hemisphere in September and October. In general, however, new waves of lockdowns in regions such as Europe, South America and Russia are expected to be more targeted and less strict as health systems will be better prepared than they were in April,” says Rystad Energy’s senior oil market analyst Artyom Tchen.

The demand for total oil products would not be shared equally. Similar to the current status quo, jet fuel and gasoline would be dealt the most painful blows. But with more testing and smarter lockdowns, a lot of this destruction can be avoided – international borders and travel can gradually reopen, with travel restrictions on certain countries and regions being imposed as new Covid hotspots appear....

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