Coronavirus infection increase poses new risk to recovering US gasoline, diesel demand

Washington — Rising US coronavirus infections pose new risks to oil demand, as the potential grows for states or cities to re-impose stay-at-home orders and businesses to slow reopening activities seen in recent weeks.

The five states with sharpest increase in new cases in the past week represent one-third of US gasoline demand, including Texas, where Governor Greg Abbott urged residents to stay home to contain the spread of the virus.

Arizona, California and Texas all set single-day records for new infections June 23.

Texas' Abbott stopped short of imposing new lockdown restrictions, but asked residents to voluntarily limit trips out.

"Because the spread is so rampant right now, there's never a reason for you to have to leave your home," Abbott said June 23. "Unless you do need to go out, the safest place for you is at your home."

Texans consumed about 932,000 b/d of gasoline before the crisis, or just under 10% of total US gasoline demand, according to US Energy Information Administration data.

California Governor Gavin Newsom said he is prepared to re-impose stay-at-home restrictions if needed.

"We don't want to do that, we don't intend to do that, but let me make this very clear—we are prepared to do that if we must," Newsom said June 23.

California's pre-crisis gasoline demand ranked first in the US at 1 million b/d, or 10.7% of overall US demand, according to the EIA.

Demand outlook

S&P Global Platts Analytics estimates US gasoline demand sank to 5.9 million b/d in April during peak lockdown restrictions before rising to 7.2 million b/d in May.

Platts Analytics sees US gasoline demand rising to 8.8 million b/d by December and averaging 8.1 million b/d in 2020, down from 9.3 million b/d in 2019.

US distillate demand bottomed out in April at 3.4 million b/d, according to Platts Analytics, which sees it staying around 3.7 million b/d through September. It projects US distillate demand will average 3.9 million b/d in 2020, down from 4.1 million b/d in 2019.

Before the latest wave of new cases, Kayrros found in early June that US gasoline demand from commuters and other light vehicles has seen a mostly uniform rebound from sharp lows in April, even in states with the longest lockdown restrictions.

However, diesel demand from long-haul trucking appears to be stagnating, even though it never plummeted like commuting did when governors ordered residents to stay at home. Kayrros predicted this slower recovery for trucking could be an indicator of economic trouble ahead.

Gary Eisen, an economist for S&P Global Platts Analytics, estimates travel to and from work typically accounts for roughly 30% of US driving demand. Record-low unemployment numbers have eased in recent weeks, with payrolls seeing an unexpected increase in May.