Rystad Energy has compiled a comprehensive report calculating the effect of the novel coronavirus in our lives 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, Rystad Energy have made substantial updates to most of its estimates.
Global oil demand:
In a ground-breaking revision of its previous estimates, Rystad Energy’s forecast for global oil demand now projects a decrease of 0.6%, or 600,000 barrels of oil per day (bpd), year-on-year. The 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 the Rystad Energy simulations of the virus’ growth patterns this year.
Road fuel demand:
Rystad Energy believes 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 Rystad Energy expected this demand segment to grow to 50.3 million bpd in 2020, but it is now seen 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, Rystad Energy expects a rising number of cities to implement quarantines and travel restrictions, in addition to those already in place in Italy. From this, the assumed 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, Rystad Energy assumes 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, Rystad Energy assumes the impact will be 20% 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.
Jet fuel demand:
Among the various fuel sectors, Rystad Energy expects jet fuel to be hit the hardest. Rystad Energy expects global air traffic will fall by approximately 16% this year versus the levels seen in 2019, which it estimates stood at around 190,000 flights per day (including commercial, cargo and private flights as well as helicopters). To put the reduction into context, Rystad Energy’s pre-coronavirus estimate was for an average of 200,000 flights per day this year.
US President Donald Trump’s announced ban on air travel between Europe and the US 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, Rystad Energy assumes that the common summer air travel peak will occur later in the season. Its 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, Rystad Energy now sees jet fuel demand falling by 11% year-on-year, equating to 780,000 bpd. Last year’s demand for jet fuel was seen at about 7.2 million bpd.
Other report findings:
The COVID-19 Report, aside from energy related projections, also includes some of Rystad Energy’s forecasts on how the virus will spread globally and offers scenarios of how it will evolve in the countries that are most affected.
The energy-related projections of the report, which was made available to clients on 11 March and will be updated on a weekly basis, did not include the effect of the US-imposed ban on air travel from Europe. However, the forecasts provided in the 12 March press release have been updated and do include the effects of this development.
Rystad Energy numbers will be adjusted for every new dramatic step taken by governments to slow the spread of COVID-19.
The report is now publicly accessible at https://www.rystadenergy.com/globalassets/pdfs/202003011_rystadenergy_coronavirusreport.pdf.