Indonesian gasoline demand recovering but headwinds remain: sources

Singapore — Indonesian domestic gasoline demand has started to show signs of upward momentum, but headwinds from the ongoing coronavirus pandemic has hampered the pace of recovery, industry sources told S&P Global Platts in the week started June 28.

In a June 27 statement from Indonesian state-owned company Pertamina, the company said "fuel consumption in the New Normal era or since June 8, 2020 has begun to rise to an average of 114 thousand KL [kiloliters] per day ... [having] increased by around 10% compared to the enactment of the Large-Scale Social Restrictions (PSBB)."

The "New Normal era" refers to Jakarta's move to ease lockdown restrictions amid the COVID-19 outbreak in a bid to restore economic and social activities. In the "New Normal era," restaurants as well as businesses have been allowed to resume at limited occupancy rates, with public transportation services having also been resumed.

Prior to the coronavirus pandemic, the "normal" average consumption from January-February was recorded at "135 thousand KL [kiloliters] per day," said the statement.

During the PSSB, which lasted from mid-March to May, Indonesian gasoline and gasoil consumption "decreased by around 26%," said Fajriyah Usman, Pertamina corporate communication vice president, in the June 27 statement.

At present, the reduction "has [narrowed] to around 16% compared to the average normal consumption," Usman said, pointing out that "gasoline consumption was recorded at 78.82 thousand KL [kiloliters] while gasoil consumption reached 34.99 thousand KL [kiloliters]."

DEMAND RECOVERY HEADWINDS

But even with the improvement to motor fuel sales, driving activity in Indonesia has faced headwinds.

According to mobility data from Apple, driving activity across Indonesia as of June 27 stood at 9% over baseline levels, up from the 70% below baseline levels from April and mid-May.

Most of the increment, however, has been focused on the cities, such as Jakarta, which has seen activity surging to 24% over baseline levels as of June 27.

"The cities will see the bulk of the recovery because that is where business is focused. People will have to drive to get to work. More so as cities are where people can afford to drive," one Singapore-based source said.

"Indonesia is a very big country and its normal for the richer parts to be up and about before the more rural ones. It will take more time for total demand to climb back," a second source said.

Supporting the prevailing sentiment, Usman said in the statement that "economic recovery in a number of regions has not been evenly distributed."

"Indonesia's battle against the coronavirus isn't over, which will ultimately still stop people from moving about as they did before," a second industry participant said.

As of early June 31, Indonesia has recorded over 54,000 cases of the coronavirus, with the daily number of new cases averaging around 1,000/d in June, according to media reports.

MARKET IMPACT

Notwithstanding the slow pace of recovery, an improvement in Indonesian gasoline demand is still considered supportive to the overall gasoline complex, sources said, contrasting tepid Indonesian import demand from March to June.

"At least we can expect some demand, as opposed to earlier, when import volumes dropped sharply," another source said.

In March and April, Indonesia imported an average of 9.41 million barrels of gasoline, down from the average of 10.914 million barrels imported in March 2019, Statistic Indonesia data showed.

May, June and July planned import volumes were reported to be around 7 million to 9 million barrels, as demand stayed tepid, Platts reported earlier.

Indonesia is Southeast Asia's largest buyer of gasoline, and as such, is tracked by gasoline participants as a prelude in determining regional market strength.

Reflecting the recovery in Indonesian import appetite, at least five MR-sized tankers – Jag Pranam, Klara, Clearocean Marvel, Celsius Palermo, and Salamis – discharged gasoline in Indonesian ports in the second half of June, according to shipping sources.

The FOB Singapore 92 RON gasoline crack against front-month ICE Brent crude futures also traced the demand recovery, averaging plus $2.17/b in June, up from May's average of minus $1.46/b, Platts data showed.