Meanwhile, China air travel skyrockets a massive 145 percent: File Image/Pixabay.
Continued worry that global oil demand will be impacted by rising Covid infections in India and some parts of Asia once again caused crude prices to drop on Wednesday, this time by 2 percent - even though the demand recovery that began in earnest upon the rollout of the vaccines continued.
Prices were also affected by data from the American Petroleum Institute showing U.S. crude oil and distillate stocks rose by 436,000 barrels in the week ended April 16, according to two market sources.
Brent declined $1.14, or 1.7 percent, to $65.43 per barrel at 12:50 GMT; West Texas Intermediate fell $1.28, or 2 percent, to $61.39 per barrel.
Bill O’Grady, Confluence Investment Management
Once we get toward summer, we'll see demand pick up
But while rising infections are troubling, it's remains to be seen whether demand recovery will abate, especially considering some governments have redoubled their efforts in the past few weeks to fortify their vaccination programs, most notably in Europe: also, major oil trading companies are reportedly stowing diesel and jet fuel on newly built supertankers in Asia and Africa in anticipation of the vaccinations driving prices higher in the months ahead.
In China, Sengyick Tee, an analyst at Beijing-based SIA Energy, said Chinese oil demand in May could be as much as 20 percent higher than the same period in 2019; also congestion levels on roads during morning rush hours in the week through April 12 were higher than average levels in 2019 in major cities including Beijing, Shanghai, Tianjin, Changsha, and Wuhan, according to TomTom International BV.
Better still, airplane travel within China was up 145 percent from the same period last year in early April, causing Mia Geng, an analyst at FGE, to remark, “I believe China’s jet fuel demand will stabilize from here and see gradual improvement over the rest of the year, mainly supported by domestic travel; flight numbers could hit a record high during the upcoming Golden Week in May.”
But taking the long view and the pandemic notwithstanding, energy companies are foreseeing a peak in crude demand due to the rise of electric vehicles: BP predicted it could start in 2030, while Equinor sees demand at 99.5 million barrels per day (bpd) in 2030, and falling to 84 million bpd in 2050.
Meanwhile, the International Energy Agency said peak oil demand is already a reality in advanced economies but is offset by a rise of 9 million bpd in developing economies between 2019-2030.
With the positives seemingly outweighing the expected glitches in the road to a post-pandemic era, Bill O’Grady, executive vice president at Confluence Investment Management, was compelled to remark, “The market’s about fairly valued, and will likely resolve itself to the upside over time.....once we get toward summer, we’ll see demand pick up.”