Jet demand to crash by 26% in 2020 on coronavirus, gasoline by 11%: IEA

Demand for transport fuels such as jet fuel and gasoline in 2020 will dive by 26% and 11% respectively exacerbated by heavy containment measures caused by the coronavirus pandemic, the International Energy Agency said Wednesday.

Jet fuel demand will average 5.93 million b/d in 2020 compared with 8 million b/d last year as the aviation sector is battered by the pandemic, the IEA said in its latest monthly oil market report.

The situation is expected to peak in April, when jet fuel demand will fall by 4.6 million b/d or 60%, a historic record, it added.

Total oil demand in 2020 is however expected to fall by a record 9.3 million b/d with a whole decade of oil demand growth poised to be lost in one year due to the massive demand destruction caused by the pandemic.

The height of the demand collapse will be in April, when consumption drop to 1995 levels, with demand falling by as much 29 million b/d year on year.

GASOLINE, DIESEL IMPACT

Demand destruction for gasoline, which accounts for almost a quarter of global oil demand, has begun to accelerate, with most of the world in lockdown.

The impact of these containment measures is likely hit gasoline the most on a volume basis, according to the IEA.

Gasoline demand in 2020 is now expected to fall to 23.50 million b/d from 26.4 million b/d in 2019, the Paris-based agency said.

Demand in April is estimated to fall 11.2 million b/d year on year, the largest decrease ever recorded by the IEA.

A modest growth in demand will slow the fall to 10 million b/d in May, it added.

Similar factors will weigh on diesel demand but not to the same extent, as a diesel is used in trucks and ships to transport goods, as well in the manufacturing sector.

Diesel/gasoil consumption is only expected to fall by 2 million b/d, or 7%, to 26.82 million b/d in 2020, as a result.

"While demand has no doubt been affected by containment, owing to the closure of shops, several basic activities and industries have remained open, thus providing a demand floor," it said. "These activities are expected to bounce back relatively fast, with governments in Europe already mulling the reopening of important industries.

H2 RECOVERY

There will be some recovery in the second half of the year, but jet demand will still fall as much as 20% in this period as traffic only progressively returns to normal. Heating and cooking account for only 15% of overall jet/kerosene consumption and "will undergo little or no contraction," it added.

Jet fuel demand fell by 4% and 14% in January and February respectively according to IEA estimates. With the bulk of the world's aircraft fleet grounded, demand would have likely fallen by 27% in March, the IEA noted.

The jet fuel market has collapsed in the past few months because of demand destruction as the coronavirus outbreak has spread fast globally.

Jet fuel traders are putting it into storage to cope with the lack of prompt demand, as the whole supply chain is under stress.

More and more refiners are blending jet fuel into diesel to cope with the lack of demand, as middle distillates cracks have plunged on such a bleak demand picture.

IEA DEMAND FORECASTS (MILLION B/D)

Source:IEA