European oil demand projections slide in the face of renewed Covid pressure
(Bloomberg) --The oil demand recovery in Europe, a region that accounts for about 15% of global consumption, looks set to take a fresh hit as the continent struggles to deal with another wave of coronavirus cases that could curb summer travel plans.
Shares of all of Europe’s biggest airlines, including British Airways owner IAG SA, slumped this week over concerns about a deteriorating outlook for bookings. Germany, France and Italy have all widened lockdown measures this month. The U.K. is to fine people up to 5,000 pounds ($6,900) if they take overseas holidays now, while wavering about a planned reopening on May 17.
Brent crude futures slumped almost 5% on Tuesday, the second time in four sessions that they’ve fallen sharply. A recovery in European oil demand was widely expected, but the emergence of a third wave of infections has deferred that, said Jonathan Leitch, an oil analyst at Turner, Mason & Co.
“We’re not going to get that seasonal peak and we’re not going to get the recovery that we were expecting,” he said, discussing Europe’s jet fuel demand, which is usually stronger in the summer.
For the gasoline and diesel market, the impact of the latest restrictions will be “negative versus expectations but not necessarily demand being cut from current levels,” he said.
The global recovery in oil demand could be curbed by as much as 1 million barrels a day by vaccination glitches -- such as those being observed in Europe -- according to Rystad Energy, an Oslo-based consultant.
Europe’s flight numbers are languishing at more than 60% below 2019 levels for the time of year, a situation that has shown little-to-no improvement for weeks, according to the latest data from Eurocontrol. In the U.S., meanwhile, airport passenger numbers have been steadily rising and wider demand is improving more strongly.
The chances of anything close to a normal rebound in Europe this summer are diminishing by the day, Mark Manduca, an analyst at Citi said in a note to clients Tuesday.
IAG has tumbled almost 10% this week as government officials and ministers expressed concerns that a restart in overseas travel could jeopardize the country’s gains from a rapid vaccination campaign. EasyJet Plc, Ryanair Holdings Plc and tour operator TUI AG have slumped too.
Brent futures fell as low as $61.41 on Tuesday. That’s a retreat of about $10 a barrel from their year-to-date high, set on March 8.
