Global mobility recovery wobbles as COVID-19 delta variant spreads

Oil demand indicators in most of the world's biggest consuming economies slipped back from post-pandemic highs in the week to June 20, according to mobility data, as concerns grow over the impact of the highly infectious delta variant of the COVID-19 virus as it spreads across the globe.

Land-based mobility, a key proxy for gasoline and diesel demand, dipped to 14% below pre-COVID-19 levels in the week in the world's top oil users, down from a post-pandemic high of 13.6% on June 16, according to mobility data reported by Google.

The data suggests an expected summer surge in activity and oil demand in the world's biggest energy consumers may be delayed if more countries stall reopening plans over the latest strain.

The variant, first detected in India, has already become the dominant strain in many countries, causing an uptick of infections in Israel, the UK, parts of the EU and Australia. The variant also accounted for more than a fifth of new cases in the US in the last two weeks, according to the top US infectious-disease expert Anthony Fauci. The variant has now been detected in 85 countries, the World Health Organization said June 23, and remains a variant of concern with evidence suggesting it may reduce vaccine protection against infection.

"Economies are largely pushing through the impact of coronavirus but can tend to be 'two steps forward and one step back'," S&P Global Platts Analytics said in a June 23 note. "Mutated variants are an ongoing problem and vaccine effectiveness is likely to at least dampen the impact of renewed outbreaks."

A renewed rise in global cases cannot be ruled out, however, as many economies continue to reopen over and summer travel picks up, Platts Analytics said.

Given the continued rollout of vaccines, however, a resurgence of infections and disease to the levels seen at the global peak in early May is "highly unlikely," it said.

US mobility moves sideways

Some market watchers are predicting further upside to global oil prices over the current 32-month highs of around $75/b as an expected demand rebound from reopening economies creates a near-term supply deficit.

S&P Global Platts Analytics has forecast global oil demand to surge by 8 million b/d from May to August, led by a jump in US gasoline volumes as summer driving activity rebounds in the world's biggest economy. While heavy transport-based diesel demand has remained more resilient to the pandemic, a slow return to global aviation means jet demand will likely remain close to 1 million b/d below pre-pandemic levels by year-end, Platts Analytics forecasts.

For the year, Platts Analytics sees global oil demand growing by 5.6 million b/d vs 2020, still 3.5 million b/d below 2019 levels.

In the US, the world's biggest oil consumer, mobility levels have stagnated at around 15% below pre-crisis levels over the last two weeks, the Google data shows.

Europe's top five economies, which saw mobility rise to a post-pandemic high in the week to June 13, have slipped back after rebounding from a wave of early April lockdowns, the data shows.

Mobility has also backtracked in Brazil over the weeks, the data shows, while Russian mobility continues to slide back after hitting a full recovery a month ago.

In China, the world's second-biggest oil consumer, growth prospects this year remain solid after strict, early containment measures paid off. Based on mobile phone activity in workplaces, retail and recreational sites, and transport hubs, the Google data does not cover China where oil demand has already recovered to pre-pandemic levels.

Meanwhile, mobility continues to improve in India, the world's No. 3 oil consumer, after mobility slumped to 57% below pre-pandemic levels in the week to May 20 due to the delta variant. The data also shows mobility in South Korea remains around 4% above pre-pandemic levels after fully recovering in May.