Global Energy Review 2020

The impacts of the Covid-19 crisis on global energy demand and CO2 emissions
GER2020 Abstract cover

Oil

As a consequence of global lockdown measures, mobility – 57% of global oil demand – has declined at an unprecedented scale. Road transport in regions with lockdowns in place has dropped between 50% and 75%, with global average road transport activity almost falling to 50% of the 2019 level by the end of March 2020. Air travel in certain regions has almost come to a halt, with aviation activity in some European countries declining more than 90%. Aviation activity in China has rebounded slightly from the low at the end of February, as lockdown measures have eased slightly. Nonetheless, as lockdowns spread, global aviation activity declined a staggering 60% by the end of Q1 2020. As a result of declines in mobility, in March alone world oil demand plummeted by a record 10.8 mb/d year-on-year.

Evolution of aviation activity in selected countries in early 2020

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Evolution of road passenger transport activity in selected countries in early 2020

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In China, the country first affected by the Covid‑19 outbreak, lockdowns began to curb mobility from the end of January, resulting in an estimated decline of more than 13% in quarterly oil demand compared with Q1 2019. China’s National Bureau of Statistics and Chinese Customs data on refinery production and trade indicate a decline in total oil demand in February of over 2.5 mb/d, or 20%, relative to February 2019. The drop was largely due to a decline in gasoline demand of 1.1 mb/d, or 33%, while demand for jet kerosene dropped by 28% as aviation activity plummeted in February. In March, activity increased as certain provinces eased restrictions. Nonetheless, we estimate that oil demand levels in China were 22% lower in March 2020 than in March 2019.

The damage done by Covid‑19 to oil demand beyond China became clearer during March, as the outbreak moved to Europe and the United States and a growing number of countries imposed strict containment measures. Oil demand in March declined by more than 10 mb/d relative to March 2019, pushing Q1 2020 demand in advanced economies down by 2.3 mb/d relative to March 2019. In the rest of the world, demand dropped by 3.3 mb/d across Q1 2020. Chinese oil demand is believed to have accounted for 1.7 mb/d of the non-OECD drop. In OECD countries, Europe’s oil demand is estimated to have dropped by 0.9 mb/d, America’s by 0.8 mb/d and Asia’s by 0.6 mb/d. Total oil demand is estimated to have declined by 5.6 mb/d in Q1 2020. 

As global aviation activity collapsed, jet fuel was the oil product with the largest decline in demand relative to 2019. We estimate that combined jet fuel and kerosene deliveries fell in January by 310 kb/d, or 4%, and in February by 1.1 mb/d, or 14%, relative to 2019. Demand is likely to have fallen by 2.1 mb/d, or 27%, in March after travel bans were implemented widely and a large proportion of the world’s aircraft fleet was grounded from around the middle of the month. In Q1 2020, world jet kerosene demand is estimated to have fallen 1.2 mb/d from Q1 2019 levels.

Gasoline was the fuel with the largest absolute decline in demand related to Covid‑19 containment measures. In the days after the world’s largest cities implemented lockdowns or other restrictions, road traffic fell sharply. Peak congestion in mid-March was down by 50% to 60% in cities as varied as Istanbul, Los Angeles, Mexico City, Mumbai, New York, Paris, Sao Paulo, Rio de Janeiro and Toronto, according to data supplied by the navigation device maker TomTom. Anecdotal evidence suggests that gasoline demand is down by 70% in both France and the United Kingdom during the confinement period. Reduced mobility is estimated to have lowered world gasoline demand by 1.7 mb/d in Q1 2020 compared with Q1 2019. Diesel demand fell by 1.5 mb/d because of lower economic activity and restrictions to rail and bus transport.

Global oil demand is expected to be a record 9.3 mb/d lower in 2020 than in 2019. The impact of containment measures in 187 countries and territories has almost brought global mobility to a halt. Demand in April is estimated to be 29 mb/d lower than a year ago, falling to a level last seen in 1995. For Q2 2020, demand is expected to be 23.1 mb/d below 2019 levels. The recovery in the second half of 2020 is projected to be gradual, as economies come out of containment and activity levels rise. Nonetheless, demand is not expected to reach pre-crisis levels before the end of the year, with December demand projected to be down 2.7 mb/d from December 2019 levels.

Change in monthly oil demand in selected countries, 2020 relative to 2019

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Lockdowns in Q1 2020 and a slide in consumer confidence reduced not only transport activity but also global car sales, with important implications for oil demand across the rest of the year. Car sales in China declined 82% in February relative to 2019, before recovering to 48% below 2019 levels in March. Across the European Union, March car sales fell 55% from 2019 levels. Electric vehicle (EV) sales maintained their momentum in the European Union, however, reaching record shares in sales in many countries, with 2020 CO2 standards playing an important role in boosting sales. The picture for EVs in Europe contrasts with China where EV sales in Q1 2020 declined even further than total car sales. Car sales in the United States also experienced major declines, down 38% in March, while sales in India in the same month fell 50%. Lower car sales will impact gasoline demand through the remainder of 2020. The drop in car sales slows improvements in energy efficiency where there are fuel economy targets in place. This can reduce declines in gasoline and diesel demand in markets with limited expansion in total fleet size, such as the European Union and the United States. In expanding markets, however, slower sales can put a brake on demand growth, compounding the impacts of Covid‑19.

We expect gasoline demand to remain under pressure in the second half of 2020, falling by 590 kb/d on average, because of the postponement of large events such as the Tokyo Olympics and because some containment measures are bound to stay in place in some countries. For 2020 as a whole, we forecast gasoline consumption to decline by 2.9 mb/d, or 11%.

The same factors are likely to weigh on diesel fuel consumption, but not to the same extent. A substantial share of diesel demand globally is used in trucks and ships to transport goods, or in the manufacturing sector, rather than in passenger cars. While demand has no doubt been affected by containment, owing to the closure of shops in many countries, several basic activities and industries have remained open, thus providing a demand floor. The International Maritime Organization’s sulphur regulations on bunker fuel, which took effect at the start of the year, offset part of the drop by boosting diesel demand in the shipping sector. By contrast, the warm temperatures across the northern hemisphere led to lower diesel demand for heating than in 2019. Overall, for 2020, diesel consumption is expected to fall by 2 mb/d (7%).

The International Air Transport Association expects flight capacity utilisation to average 65% below 2019 levels in Q2 2020, 40% in Q3 2020 and 10% in Q4 2020. Data show that global flight numbers were down 70% at the start of April from a year earlier. Looking ahead to the rest of 2020, we expect demand for jet fuel and kerosene to decrease 20% in the second half of the year relative to 2019. For 2020 as a whole, demand is expected to fall by 2.1 mb/d on average, or 26%.

Covid‑19 containment measures will also reduce demand for other oil products, such as LPG, ethane, naphtha and residual fuel, but the impact is likely to be less acute than for gasoline, diesel and jet fuel. Demand is increasing for certain petrochemical products because of greater consumer demand for packaging and demand for personal protective equipment, with a notable potential for increased PET demand.

The oil outlook crucially depends on the duration of the Covid‑19 outbreak and the strength of the subsequent restart of economic activity. A reduced lockdown period and a strong rebound of the economy in the second half of 2020 could reduce the annual decline in oil demand to 6.5 mb/d. Gasoline demand, in particular, could be supported by unwillingness to use public transport as recent trends show in China. Declines in oil demand could be even greater, on the other hand, if a second wave of Covid‑19 occurs in the second half of 2020, constraining activity and oil demand across most of 2020.