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European mobility edges to post-pandemic high despite rising Delta infections

Highlights

France, Italy lead mobility improvement

Lingering concerns over new restrictions

Airline capacity continues to improve

Oil demand markers in France and Italy improved sharply in the week to July 11, pulling up the average in Europe's biggest economies despite the Delta variant driving up infection rates and a number of countries reviewing travel and further reopening plans.

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The ongoing lifting of most lockdown measures saw economic land-based mobility in Germany, the UK, Spain, France, and Italy improve to around 12% below pre-COVID-19 levels, according to Google data, the highest since the global economy began shutting down in March 2020.

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.

France and Italy both saw mobility improvements, with France now just 3% below pre-pandemic levels at the end of the week, the data showed. Mobility in the region's top economies, Germany and the UK, was little changed on the week.

But with infection rates from the Delta variant still climbing sharply in a number of countries, renewed restrictions are casting a shadow over forecasts for a sharp rebound in oil and energy demand in the coming months.

France, the Netherlands, Greece and Spain all announced new restrictions on July 12 to curb the rise in infections from the Delta variant. In the week ended July 10, Germany and France warned their citizens against travel to Spain, where the infection rates have the highest in mainland Europe.

The UK, however, has confirmed that it will lift its remaining restrictions on July 19 despite high infection rates as hospitalizations and death rates remain low.

"The transmission of the delta variant remains a concerning trend in countries which are now seeing an uptick in cases," S&P Global Platts Analytics said in July 7 note. "Effectiveness of vaccines against such variants is deemed significant... we still believe that coronavirus will increasingly be viewed as a chronic, but largely controlled phenomenon, of which society will continue to adapt and respond. As such, the direct impacts on the global economies and energy consumption patterns are seen as diminishing over time."

Airline capacity

With some European countries maintaining curbs on international travel to areas with high infection rates, the potential for a slower-than-expected recovery in regional jet fuel demand remains.

All major markets in Western Europe saw capacity increases in the week, however, according to aviation data provider OAG.

In Western Europe, where airline capacity suffered the most globally, seat capacity stood at 43% below normal pre-pandemic levels on July 12, up 4.4% from a week ago, as summer holiday markets reopen and airlines add more capacity to regional destinations, OAG said.

Platts Analytics expects European oil demand to grow by 650,000 b/d in 2021, returning close to pre-pandemic levels of 12.3 million b/d in Western Europe by year-end.

Globally, Platts Analytics last month raised its 2021 oil demand growth forecast by 100,000 b/d to 5.7 million b/d to reflect stronger Q1 demand signals in the US and Europe. Platts Analytics forecasts oil demand to grow by 2.5 million b/d in July, 1.7 million b/d in August, followed by a seasonal decline of 400,000 b/d in September.