LONDON, March 20 (Reuters) - Global oil demand could fall by more than 10% due to lockdowns spreading across Europe to fight the coronavirus outbreak as well as measures in the United States, Vitol, the world’s largest oil trader, said on Friday.
But the drop would be much higher if the virus prompts widespread lockdowns in United States, the world’s largest oil consumer, said Giovanni Serio, head of research at Vitol.
“A lockdown like in Italy can be taken in the U.S. only if the spread of the virus gets out of control. That is not our base case,” Serio said, adding that even a 10% drop in U.S. demand would lead to a consumption drop by 2 million barrels per day (bpd).
“Global demand could easily drop by 10 million barrels per day or more,” he said, adding that it was impossible to predict how long demand could remain depressed as it would depend on the spread of the virus and how long lockdowns last. The world consumes around 100 million bpd.
“Demand destruction this year depends on how many countries follow an Italian-style lockdown. The drop in Italian consumption has been dramatic. If you extrapolate it to the rest of Europe, and particularly the U.S., then you can get as bearish as you like,” he said.
Serio said Italian urban traffic numbers were currently down 60%, putting some 40-50% of demand at risk.
Spain and France were close to imposing similar measures and Germany was also heading for a 40% reduction in urban traffic numbers.
If the United Kingdom followed the path, then some 40% of Europe’s demand could be at risk representing 7 million bpd or 7% of global demand, Serio said.
In the United States up until last week demand was strong which Serio said may have been linked to people filling tanks.
China, meanwhile, was showing signs of recovery in traffic data and industrial activity, with Asia overall benefitting from low oil prices, he noted.
Serio said that if OPEC kept producing at elevated levels, the world would soon run out of available commercial storage in key consuming centres, which would put oil prices under more pressure.
“We are talking about a couple of months when we might run out of available commercial storage. It will be important how much China buys into its strategic stocks,” he said, adding that Chinese purchases could help alleviate the pressure on storage available in the West. (Reporting by Dmitry Zhdannikov; editing by Jason Neely)
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