Energy Prospectus

Reuters - U.S. petroleum consumption has started to rise as the economy emerges from lockdowns imposed to control the spread of the new coronavirus, giving the oil industry hope it has come through the lowest point in the cycle.

Similar recoveries in fuel consumption are expected at varying rates across the other major economies as they gradually emerge from lockdown and are likely to push the oil market into supply deficit in the third quarter.

In most cases, the recovery in petroleum demand is expected to be led by middle distillates, as the manufacturing, construction and freight transportation sectors return to work.

Gasoline consumption will increase, with some diversion of travel from public transport to private motor cars for health reasons, but with the overall gain limited by the loss of leisure-related travel.

But jet fuel use is likely to remain depressed for an extended period, as continued quarantines and pressure to introduce social distancing on flights prevents the sector struggles from resuming meaningful schedules.

The result will be an increase in relative demand for light distillates (gasoline) compared with middle distillates (diesel but especially jet), which the refining system will have to accommodate.

Oil prices continue to show positive momentum as the oil market appears set to rebalance faster than expected. Rystad estimates that the market was 16 mb/d oversupplied in April. But by June, 4 mb/d in demand will come back and supply cuts of 12 mb/d will move the market back to an equilibrium, although at much lower levels compared to the pre-pandemic era.

OilPrice.com: Demand on the upswing. Roughly 4.1 billion people went into lockdown at its peak, but more than 90 percent of them live in areas that have seen some sort of a reopening. Driving activity and gasoline demand are rising, boosting bullish sentiment.

Read: https://oilprice.com/Energy/Crude-Oil/I ... -Away.html

"According to IEA’s Birol, increased use of cars instead of public transport after the lockdowns and the depressed new passenger vehicle sales mean that oil demand for road transportation at least would recover faster than demand for other uses of oil." < Susan & I live in a neighborhood with a lot of young families. I know from talking to them that they are planning long driving vacations with their kids this summer. The family directly across the street with four children recently purchased a large truck and a travel trailer. I now think there is a good chance that we see a sharp increase in gasoline demand this summer. Young families now know the threat to them from SARS-COV-2 is extremely low and they are tired of being trapped at home with their kids. We may have riots if the schools don't open in the fall.