Traffic counts show oil demand flatlining, not nosediving
From the number of cars crossing San Francisco’s Bay Bridge to the traffic jams in Berlin and air pollution on the streets of Beijing, everything suggests that a recovery in global fuel demand is wobbling.
What the world’s not doing is heading back to the kind of historic collapse in consumption witnessed earlier this year, despite swaths of Europe returning to restrictive measures to combat the spread of COVID-19.
Those are the findings of high frequency data that suggest countries accounting for more than 70 percent of global petroleum consumption are faring a lot better this time around than during the previous lockdowns.
The data will give producers in the Organization of Petroleum Exporting Countries and their allies cautious optimism that the market can limp through until some time next year, with hopes rising that a vaccine to halt the spread of the virus will help consumption to recover.
“The global oil demand recovery seems to have almost stalled” but remains robust in Asia, in particular China and India, said Bassam Fattouh, head of The Oxford Institute for Energy Studies.
On top of anecdotal evidence from streets in major cities, Bloomberg News has tracked dozens of weekly data points for gasoline and diesel demand around the world, from tolls on bridges in the U.S. to city traffic jams in Europe to pollution levels in Beijing.
Taken together, a picture emerges that demand may not be growing on a month-on-month basis anymore, as it did steadily since the recovery started in May. At best, it’s probably flatlining. At worst, it might be ebbing. What it’s not doing is collapsing like it did from February all the way to late April.
Traffic in capitals like Paris and Madrid is lighter than a few weeks ago, but the streets aren’t almost empty like they were six months ago. Take the U.K., which went into a new lockdown in early November. Schools are open this time, supporting car use. Traffic has fallen to roughly where it was in early June, down about 30 percent from normal levels, compared to a plunge of nearly 80 percent in late March.
The traffic data go a long way to determining the consumption of gasoline and diesel, two products that are vital for the OPEC+ producers. In less than four weeks, they will need to decide whether to hike output in January, as previously planned, or change course to keep supplies more constrained.
For now, though, weekly data show a huge geographical split. Colonial-era terminology still lives on in the oil market, with an imaginary line dividing the world in two at Egypt’s Suez Canal. East of Suez, as oil traders often refer to Asia, demand growth remains quite strong. ,
The most recent traffic, pollution, and highway-use data suggest the trend continued into October, only disturbed by Chinese holiday festivities. Pollution levels in Beijing are running at the highest since March as more people drive into work.
The situation is different west of Suez. Across Europe, road usage was already waning even before a fresh round of lockdowns pushed traffic lower still. In the week before last, American drivers clocked 10 percent fewer miles on highways than a year ago.
That’s below the 4 percent reduction of early September, but well ahead of the 49 percent drop in early April, when several states imposed lockdowns.