China's New Year travel restrictions slow, but don't stop oil demand recovery

    * Analysts cut Q1 oil demand forecasts by up to 400,000 bpd 
    * Q1 demand to fall vs Q4 2020, but expected higher than Q1 2020 
    * Lower demand seen for gasoline, jet fuel 
    * Diesel to buck trend as factories restart quickly after holiday 

    By Muyu Xu and Florence Tan
    BEIJING/SINGAPORE, Feb 2 (Reuters) - China's efforts to keep people from
travelling for Chinese New Year because of several clusters of COVID-19
infections are forcing analysts to revise first-quarter fuel demand estimates,
but are not expected to derail its post-pandemic recovery. 
    China's Ministry of Transport has said passenger trips during the 40-day
spring travel season could be down by 40% from the pre-pandemic levels of 2019.
That has led analysts to cut forecasts for first-quarter oil demand by as much
as 400,000 barrels per day (bpd) on the assumption this means less gasoline and
jet fuel will be consumed.
    It also likely points to a quarter-on-quarter drop in China's oil use,
according to the International Energy Agency, the first since demand bounced
quickly back from last year's pandemic-induced contraction. But it won't undo
the resurgence in oil consumption and growth over the second half of 2020. 
    China's first-quarter oil consumption is still expected to be up 2 million
to 3 million bpd over the same quarter last year, said analysts with Energy
Aspects, IHS Markit and Wood Mackenzie. 
   "We believe a cooldown during the (Lunar New Year) may prove to be a healthy
reset for stronger rebound in Q2 21, when China can go full steam on economic
growth without being stretched by wider-scale virus outbreaks," said Energy
Aspects' China analyst, Yuntao Liu. 
    Gasoline and jet fuel are expected to take the biggest hit over the travel
period, analysts said, while diesel and other industrial fuels are expected to
buck the trend as migrant workers stay put in major cities, allowing factories
and construction sites to resume work quickly after the holidays. 
    Along with industrial fuels, petrochemical feedstocks including naphtha and
liquefied petroleum gas (LPG) will remain "bright spots", said Fenglei Shi, an
associate director at IHS Markit.     
    Chinese independent refiners, which account for about 20% of the country's
crude imports, are wary of the slowing fuel consumption and have cut crude
purchases for March delivery, trade sources said. 
    Rystad Energy sees "a downside risk to China's crude runs due to a new
outbreak and reduced demand," said analyst Simen Eliassen, warning of further
risk to fuel demand if the virus gets out of control and the government
maintains its travel restrictions longer than expected. 
    A travel index published by IT firm Baidu and based on GPS data from clients
using its mapping app shows that pre-holiday traveller numbers are down by more
than half so far from 2019. 
    Flight bookings as of Jan. 19 for Chinese New Year travel have also plunged
73.7% compared with a year ago, according to travel analytics firm ForwardKeys.
    "We expect total fuel demand to accelerate the growth after restrictions are
eased," Woodmac analyst Yuwei Pei said, adding that second-quarter demand this
year could grow by 900,000 bpd versus the same quarter in 2019. 
                 Gasoline       Jet fuel         Total oil consumption
 IHS Markit      Down 200,000   Down 80,000 to   Down 400,000 bpd in Q1
                 to 550,000     190,000 bpd in   2021 from previous
                 bpd in         Jan-Feb vs 2019  forecast due to recent
                 Jan-Feb vs                      travel restrictions.
                 2019                            Total oil demand still up
                                                 3.22 mln bpd in Jan-Feb
                                                 vs 2020 and 345,000 bpd
                                                 vs 2019. 
 Wood Mackenzie  Down 70,000 bpd for gasoline    Up 3 mln bpd in Q1 2021
                 and jet fuel combined in Q1     vs 2020 and 700,000 bpd
                 from previous forecast due to   vs 2019. Q2 2021 demand
                 recent travel restrictions      up 900,000 bpd vs 2019. 
 Energy Aspects                                  Down 250,000 bpd in Q1
                                                 2021 from previous
                                                 forecast to 13.64 mln
                                                 bpd; Q1 2021 down 1.36
                                                 mln bpd vs Q4 2020 but up
                                                 2.1 mln bpd vs Q1 2020. 
 Rystad Energy   Down 430,000   Down 150,000     Transport fuels* down
                 bpd in Feb     bpd in Feb 2021  200,000 bpd m/m in Feb
                 2021 vs Feb    vs Feb 2019      due to mobility
                 2019; down                      restrictions; up 270,000
                 30,000 bpd in                   bpd m/m in Mar as travel
                 Mar 2021 vs                     restrictions to be eased.
                 Mar 2019                        
 FGE             Down 100,000   Down 90,000 bpd  Transport fuels* to be
                 bpd in Feb     m/m in Jan       down 200 bpd m/m in Jan
                 from previous                   
 *Transport fuels are gasoline, jet fuel and gasoil (diesel).  

 (Reporting by Muyu Xu in Beijing and Florence Tan in Singapore; Additional
reporting by Shu Zhang and Koustav Samanta in Singapore; Editing by Tom Hogue)