The global refined oil market is difficult to pick up

Industry organizations generally believe that the recurrence of the new crown pneumonia epidemic will continue to be the main challenge facing the refined oil market. In the short term, the global demand for refined oil products will pick up very slowly.

　　 Recently, due to the further deterioration of the new crown pneumonia epidemic, many countries in Europe and the United States have restarted the "blockade order" or extended the existing "cities lockdown", which caused another blow to the global refined oil market demand. Many market institutions predict that in the first half of this year, the recovery of the global refined oil market will slow down.

　　The resurgence of the epidemic hits demand

　　 In the past month, the new crown pneumonia epidemic in Europe and the United States has deteriorated again. In response to the epidemic, many countries in Europe and the United States have issued stricter "blockade orders" or extended the period of "closures". According to Reuters, the latest round of nationwide "blockade" in the United Kingdom is expected to last until mid-February this year; Germany has also extended the country's blockade period and is expected to decide whether to "unblock" at the end of this month; and Italy announced A "travel ban" for 20 countries was imposed and lasted until the middle of this month. Under the new round of blockades in European countries, from December last year to the beginning of this month, traffic in most parts of Europe, including London, Rome, and Berlin, has dropped significantly.

　　 Not only in Europe, but in the United States, despite the different means of epidemic prevention and control in each state, the nationwide traffic has been hit hard. According to statistics, in California, the state with the largest population and the largest number of cars in the United States, since the state government has announced the extension of the “home restriction order”, in early January this year, the use of private cars in the state dropped by more than 15% compared with the same period last year. The year-on-year decrease in traffic usage has reached more than 60%. In addition, in many cities, including New York and San Francisco, the use of vehicles and other means of transportation has also fallen sharply compared with last year.

　　 In addition to this, in the past few weeks, Asian countries such as Japan and Malaysia have also declared a "state of emergency", and international travel has further reduced.

　　 More stringent quarantine measures have directly led to a sharp drop in refined oil sales. Up to now, gasoline inventories in the United States and Europe have been rising. According to data released by the British government, after the implementation of the "lockdown", the average sales of gas stations in the UK dropped by more than 21% compared with the week before the lockdown. Data from the U.S. Energy Information Administration also shows that after the start of a new round of blockade, the total domestic consumption of refined oil in the United States has dropped by nearly 12% from the previous week.

　　 Increased market uncertainty

　　According to data released by industry analysis agencies, after the global oil price plummeted in the second quarter of last year and market demand fell to the bottom, as of November last year, global demand for refined oil had shown a slow recovery trend. However, the new round of the epidemic has brought variables to the market.

　　Industry analysis agency Argus pointed out that Germany and the United Kingdom, as the largest land-based fuel consumers in Europe, have suffered a severe blow to their refined oil consumption due to the worsening epidemic in the past days, which in turn led to a sharp decline in the consumption of refined oil products across Europe. Argus believes that the oversupply state of the European refined oil market is expected to continue for a period of time, which will also result in the compression of the upside of the European refining profit margin. According to data provided by market research firm Euroilstock, in November last year, the stocks of middle distillates in the 15 EU member states and Norway have reached their highest levels in nearly 30 years.

　　 It is understood that due to factors such as oversupply and suppressed profit margins, most refineries in Europe can only maintain 70% of their production capacity and are likely to further reduce their production capacity in the future. At the same time, in order to avoid more losses, European refineries have been shut down for maintenance on a large scale. According to the analysis of the International Energy Agency, due to the relatively large energy transition in the European Union, the European refining and chemical industry has structural overcapacity, and it is difficult to maintain market balance even if demand recovers.

　　 In the United States, since the end of December last year, driven by the increase in crude oil prices, refined oil prices have hit a new high in the past nine months, but this has failed to bring benefits to the refined oil market. The latest fuel price outlook released by GasBuddy, a US market analysis agency, shows that although gasoline prices in the United States will rise this year compared to last year, due to the impact of the epidemic and the impending power of a new president, there will be more problems in the US refined oil market in 2021. Certainty. The US Energy Information Administration predicts that US gasoline consumption this year may only recover to 8.76 million barrels per day, which is still not as good as the level before the epidemic.

　　 It will take time for global demand to recover

　　 Reuters quoted the research organization BCA as saying that the trend of lower demand for refined oil in the next few weeks may be difficult to change. "The epidemic will be a big challenge for the refined oil market." Bloomberg also quoted industry analysts as saying that in the short term, there is currently no evidence that gasoline demand can pick up, and the impact of the ongoing epidemic on the global refined oil market cannot be ignored.

　　According to data released by the International Energy Agency, in the fourth quarter of 2020, global crude oil demand remained at 94.7 million barrels per day, down 6% from the same period in 2019. The agency predicts that in the first quarter of this year, global crude oil demand will remain at this level.

　　Under this situation, the world’s major oil-producing countries have also responded. OPEC recently stated that with the emergence of a new mutant virus and restrictions on social activities, the oil market will increase downside risks in the first half of 2021. In order to maintain oil prices, most of the OPEC member countries currently plan to maintain output reductions. The largest crude oil producer also announced that it will voluntarily cut production significantly.

　　 Financial services organization Goldman Sachs also pointed out that due to the latest wave of COVID-19, the demand outlook for the global refined oil market in the first quarter of this year has been bleak. According to Daniel Yergin, an analyst at market research firm IHS Markit, global crude oil demand may not return to its pre-epidemic level until the end of this year or early next year.