China oil demand at risk as millions scrap travel
January 26 2021 09:46 PM
RELATED STORIES
People look at festive decorations for the upcoming Lunar New Year at a market in Shenyang, in north
People look at festive decorations for the upcoming Lunar New Year at a market in Shenyang, in northeastern China’s Liaoning province on Monday. The Lunar New Year travel rush – which starts on January 28 this year – runs for 40 days and is normally the biggest mass movement of people on the planet as hundreds of millions of Chinese jump on planes, trains and automobiles to see their extended families.

By Bloomberg News

For Rachel Tian – and millions of other Chinese people – Lunar New Year festivities look set to be less of a family affair in 2021.
The Beijing-based securities analyst would normally be preparing to drive to her hometown of Baoding in Hebei province, about two hours away by car, to spend time with her parents. But this year she’s decided to follow the advice of her daughter’s elementary school that children not leave the Chinese capital over the holidays.
“I can’t leave her here and drive back myself,” Tian said. “So this holiday will be the first time in my life that I will not be with my parents.”
The Lunar New Year travel rush – which starts on January 28 this year – runs for 40 days and is normally the biggest mass movement of people on the planet as hundreds of millions of Chinese jump on planes, trains and automobiles to see their extended families. It also provides an annual boost to transport fuel consumption in the world’s biggest oil importer.
That seems unlikely this year as China discourages travel amid a resurgence of Covid-19 that’s threatening the nation’s reputation for controlling its spread. There will be around 1.7bn trips over the LNY period, the Ministry of Transport has estimated. While that’s potentially 15% higher than last year, when movement was restricted to try and stop the initial coronavirus outbreak spreading from Wuhan, it’s down a massive 40% from 2019.
The comeback in Covid-19 has been most severe in Hebei, where Tian’s hometown is, with authorities isolating the provincial capital of Shijiazhuang, a city of 11 million people. However, there have also been restrictions put in place in Beijing, Shanghai, northeast China and Hong Kong, where a densely populated neighbourhood was locked down over the weekend.
People travelling to rural areas will have to present a negative Covid-19 test result before leaving this year. Local governments are also offering incentives to stay home, including rent rebates in Zhejiang province and free meals and tickets to tourist attractions in Guangdong province. Concern that they could face quarantines when they get home may also stop people from traveling.
China was a global bright spot for oil consumption last year as its economy rebounded rapidly from Covid-19’s first wave. The resurgence is now “casting a pall on that,” said Michal Meidan, director of the China Energy Programme at the Oxford Institute for Energy Studies. “The question now though is how steep of a demand impact and how long restrictions will last for.”
It’s possible that some Chinese will ignore the travel warnings. The government ordered travel agencies to suspend sales of domestic and international package tours and imposed transport curbs before LNY last year. Many people still travelled anyway, however, helping to spread the virus.
But even before the start of the holiday period, there are indications fuel demand is weakening. Traffic levels in Beijing and Shanghai have fallen this month, according to TomTom, which collects navigation data. Chinese flight activity has also eased, said JPMorgan Chase & Co. It’s typical for gasoline and jet fuel demand in China to surge over LNY while diesel consumption dips, although 2021 could reverse these seasonal norms.
Road passenger volumes were down around 75% in the week ended January 22 compared with similar periods in the lead-up to the holidays in 2020 and 2019, according to BloombergNEF analyst Luxi Hong. Air passenger numbers are around 50% lower, she said.
JPMorgan cut its forecasts for Chinese oil consumption by 150,000 barrels a day in February and 113,000 in March, it said in a note last week. Risks are clearly to the downside, given that China is the only country that’s been willing to fully lock down its economy to rein in the virus, it said.
Lockdowns in and around Hebei have already knocked out about 3% of gasoline demand this month, according to industry consultant FGE. Barring any further escalation of infections, the seasonal motor fuel demand rally will be about 100,000 barrels a day weaker than usual, it said in a note. There’s also been a sharp pullback in jet fuel consumption in recent weeks amid flight cancellations, with demand down around 10% from December, FGE said.
In terms of refineries, there’s a regional divide. Plants in northern China, where virus restrictions have been more common, are considering run cuts amid lower fuel demand, while those further south are sustaining current levels of activity.
Diesel, however, may offer a silver lining for fuel consumption over the holiday period. A surge in liquefied petroleum gas prices amid a frigid winter has encouraged more use of trucks running on diesel rather than LPG. Coal mines, which use diesel, may also stay open over the holidays, while factories are also offering incentives for people to work through the usually quiet period.



There are no comments.

LEAVE A COMMENT Your email address will not be published. Required fields are marked*
MORE NEWS

HAPPENING IN DOHAMore