European oil demand markers creep higher as COVID-19 infection rates slide

London — European oil demand markers are showing signs of a gradual recovery, with air traffic and land-based mobility improving amid a marked slowdown in the pace of COVID-19 infections.

Economic mobility in Europe's five biggest economies edged higher in the week to Feb. 20, according to Google data, returning to levels last seen in late December as despite the ongoing wave of economic lockdowns.

Based on activity at workplaces, retail and recreational sites, and transport hubs, average mobility indexes in France, Germany, Italy, Spain and the UK were 37.7% below pre-crisis levels in the week, according to Google, compared with 40.4% below in the previous week.

Mobility improved in all five countries over the week but activity improved most sharply week on week in Germany, the data showed, where schools are set to open. Mobility in Europe's biggest economy is now less than 40% below year-ago levels, its highest since Dec. 21. Overall, the data shows European mobility levels have recovered to levels last seen on Dec. 24 when a wave of new regional lockdowns began to come into effect.

Used as a proxy for gasoline and diesel demand, Google measures mobility on the number of visits and length of stay at locations, such as offices, based on mobile phone location data.

European gasoline demand this month is forecast to rise by 60,000 b/d on January but remain 130,000 b/d lower year-on-year, according to Platts Analytics. Regional diesel and gasoil demand is also expected to improve by around 60,000 b/d and the remaining 260,000 b/d below year-ago levels.

"Rocket fueled by stimulus measures, vaccine deployment, and pent-up demand, momentum should build by early Q2, then accelerate to orbit in H2 2021. COVID-19 infections are on a downward trajectory for now and the reopening of closed businesses a key to strength," Platts Analytics said in a recent note.

Platts Analytics estimates that gasoline and middle distillate demand in the region will recover to average 1.77 million b/d and 5.6 million b/d in 2021, up 13% and 8%, respectively, from 2020 but still below the 1.82 million b/d and 5.74 million b/d seen in 2019.

Air traffic

Infection rates in the European Union have fallen by more than half from a secondary peak seen on Jan 10. Holiday bookings in the UK surged this week after the government announced plans to remove all coronavirus restrictions by June 21.

European air traffic, a key proxy for jet fuel demand, rose for a second week running in the week to Feb. 24, following a sharp pull back from a brief rebound in the year-end holiday season, according to tracking data from AirNav.

Commercial flights in Europe rose by 3% on the previous week but, compared with 2019 levels, commercial air traffic within Europe remained 73% lower in the final week of February, the AirNav data showed, little changed from a week earlier.

In Western Europe, which already has the highest percentage of lost airline capacity globally, seat capacity remained at 78% below pre-pandemic levels on Feb. 22, according to aviation data provider OAG.

S&P Global Platts Analytics estimates that European jet and kerosene demand fell to 440,000 b/d, or less than a third of pre-pandemic levels in December due to ongoing lockdowns in the region.

The recovery in jet demand this year is expected to be slow with demand in February still 740,000 b/d lower than the same month in 2020. Demand for jet and kerosene in the region is seen recovering to 1.19 million b/d by December, down 13% from the same month in 2019.