UK fuel demand set to slump over new travel curbs from COVID-19 variant
22nd December 2020 13:04 GMT

The UK's demand for road fuels and jet fuel is taking a fresh tumble after the country's efforts to contain a new strain of the COVID-19 virus ripple through the European region.

A number of European countries, as well as countries further afield such as India and Russia, suspended all flights and closed their borders to the UK on Dec. 21 after the UK announced details of a new COVID-19 strain spreading in the country. France has temporarily halted all UK arrivals and goods flows from ferries and trains.

The UK government on Dec. 20 imposed a tougher lockdown on 17 million people in the southeast of England amid concerns over the potentially more infectious COVID-19 variant.

In London, average road congestion slumped to 39% below year-ago levels on Dec. 21, according to the latest TomTom data. Seen as a proxy for gasoline and diesel demand, the daily congestion figure compares with 15% above year-ago levels in the previous week and is the lowest comparable year-ago level on a Monday since June 8, the TomTom data shows.

Europe's second-biggest fuel market, the UK's total gasoline sales last year averaged about 300,000 b/d while diesel sales averaged about 550,000 b/d, according to estimates by S&P Global Platts Analytics

Europe's latest round of lockdowns had already removed some 900,000 b/d of road fuel demand last month, according to Rystad Energy. This year, European oil demand is forecast to decline by about 15% or 1.8 million b/d.

"In the short-term, we expect mobility restrictions in the US and Europe introduced in Q4 2020 to mostly spill over into Q1 2021, for which we expect oil demand to average 93.6 million b/d," Rystad said in a note.

Jet fuel impact

The border closures and resulting flight cancellations will have an immediate impact on jet fuel demand, market watchers note.

Aviation data provider OAG estimates that the new UK lockdown will cut at least 500,000 seats from its expected global growth in scheduled seats next week of 1.4 million seats.

Western Europe already has the highest percentage of lost capacity globally, 65% below the levels seen at the start of the year, according to OAG.

Overall, demand for jet fuel in Europe remains very weak, with the cyclical Christmas boost expected to be minimal as lockdowns across the continent are reinstated.

"The region is likely to see further reductions in the first quarter of 2021 as the new COVID-19 variant takes an unwelcome trip around Europe," OAG said.

Rystad said it now sees "downside risk" to its current estimates of jet fuel demand in Europe of around 600,000 b/d, which is already less than half of 1.4 million b/d in a normal year.

Bunkerworld ,
22nd December 2020 13:04 GMT