Rystad Energy compiled a comprehensive report calculating the effect of the novel coronavirus and updating estimates for global fuel markets.
As a result of recent developments, with travel restrictions and quarantine obligations being announced daily around the world, the company has made substantial updates to most of its estimates.
Global oil demand:
In a groundbreaking revision of our previous estimates, our forecast for global oil demand now projects a decrease of 0.6 per cent, or 600,000 barrels of oil per day (bpd), year-on-year. Our estimates show that total oil demand in 2019 was approximately 99.8 million bpd, which is now projected to decline to 99.2 million bpd in 2020.
This is a severe downgrade compared to previous estimates and takes into account the quarantine lockdown in Italy, massive cancellations of flights by airlines, the travel ban between Europe and the US that was announced yesterday, and our simulations of the virus’ growth patterns this year.
Jet fuel demand:
Among the various fuel sectors, we expect jet fuel to be hit the hardest. We expect global air traffic will fall by approximately 16% this year versus the levels seen in 2019, which we estimate stood at around 190,000 flights per day (including commercial, cargo and private flights as well as helicopters). To put the reduction into context, our pre-coronavirus estimate was for an average of 200,000 flights per day this year.
U.S. President Donald Trump announced a ban on air travel between Europe and the U.S., which will further impact an aviation industry that has already been suffering as the virus has spread. Many distressed airlines will now face heavy cost cuts, and many non-profitable routes are likely to be closed.
As a base case we assume that the common summer air travel peak will occur later in the season. Our estimates are that the global daily flight count in the first quarter of 2020 will be 8,000 flights lower than pre-coronavirus forecasts. For the second quarter, the reduction is projected to be 50,000 daily flights, dropping to 31,000 in the third quarter and 13,000 in the fourth quarter.
As a base case, we now see jet fuel demand falling by 11 per cent year-on-year, equating to 780,000 bpd. Last year’s demand for jet fuel was seen at about 7.2 million bpd.
Road fuel demand:
We believe that global demand for road fuels will stay largely flat, in contrast to previous projections of growth. Road fuel demand in 2019 is estimated to have reached 49.7 million bpd. Prior to the coronavirus we expected this demand segment to grow to 50.3 million bpd in 2020, but we now see it reaching only about 49.8 million bpd.
Almost all of this reduction will occur due to reduced road traffic in the first half of 2020. In China alone, demand for gasoline and diesel road fuel was down by about 1.5 million bpd in February. Traffic in the country is now gradually returning to more normal levels.
In Europe, we expect a rising number of cities to implement quarantines and travel restrictions, in addition to those already in place in Italy. From this, we assume peak impact will be half of what was seen in China in terms of volume of reduced demand. However, it remains to be seen whether quarantines in Europe will last longer than those implemented in China.
In the US, we assume an impact equal to half of what will be seen in Europe, with a one-month lag. In the rest of Asia, including Japan, South Korea, India, and South East Asia, we assume the impact will be 20 per cent of the impact seen in China, with a one-month lag. The same level of impact is assumed for the rest of the world, but with a two-month lag.
The report can now be publicly accessible via the following web address: