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Global mobility sidetracks as demand concerns ease over Asian outbreaks

Highlights

Japan's mobility rises despite new curbs

Chinese flights rebound as new cases ease

Goldman lowers call on China oil demand hit

Demand indicators in most of the world's biggest oil-consuming countries improved or held steady in the week to Aug. 21, supporting emerging signs that the impact of the outbreak of COVID-19's Delta variant in top Asian economies may be more limited than initially expected.

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Global mobility, a key proxy for gasoline and diesel demand, remains around 13% below pre-COVID levels in the world's top 13 oil users excluding China, according to adjusted data reported by Google, down from a post-pandemic high of 11.8% on July 21.

The average mobility in Asia's top oil consumers outside China improved over the week despite new restrictions in Japan to curb rising infections.

After falling to its weakest level excluding holidays since late May 2020 in the previous week, Japan's average mobility improved by 6 percentage points to 22.4% below pre-COVID levels, the data showed.

Tokyo has so far placed 13 of Japan's 47 prefectures under emergency restrictions due to run until Sep. 12 to combat rising Delta variant cases. On Aug. 25, Japan announced plans to expand the curbs to eight more prefectures, but the restrictions are less stringent than in many other countries and focus on earlier closing times for restaurants and bars.

The data showed that In China -- the world's biggest oil importer that is not covered by the mobility data -- recent measures to curb an earlier rise in COVID-19 cases were already easing.

Brent crude prices rose back towards $70/b on Aug. 23 after China announced that no new local COIVD-19 cases were reported for the first time since the Delta variant outbreak began in July.

China outlook clearing

Scheduled airline capacity in China-dominated Northeast Asia for the period starting Aug. 23 rose 8% week on week, according to aviation data company OAG, to average 14.4% below comparable 2019 levels. The country had shut down much of its domestic aviation market at the beginning of August.

Meanwhile, China's four oil giants raised their average utilization rate to a 19-month high of 84% in August as plants returned from maintenance, in line with the expectations that the state-run refineries would compensate for the throughput cut by their independent peers.

Goldman Sachs, which expected Brent crude prices to rise to average $80/b in the fourth quarter, said it now sees the Chinese oil demand impact to be within its "conservative expectations" of 700,000 b/d compared with a previous estimate of a 1 million b/d hit over August and September.

"While peak growth is clearly behind us, we once again emphasize that commodities are driven by demand levels, not growth rates, and once we pass through this Delta variant – China cases are already declining – even oil demand levels should recover into the year end," Goldman said in an Aug. 23 note.

S&P Global Platts Analytics estimates that the global demand for key transport fuels, gasoline and diesel, was already close to pre-COVID-19 levels at 26.6 million b/d and 28.6 million b/d, respectively, in July and will fully return to 2019 levels by the end of the year.

Aviation demand edges up

In the Americas, mobility was little changed in the week to Aug. 21, as a fall in Mexico was offset by activity improvements in Canada. Mobility in the US, the world's biggest oil consumer, fell to 16% below pre-COVID-19 levels after hitting a post-pandemic high of 14.7% in early August, the data showed.

Europe's biggest five economies saw their average mobility weaken slightly in the weak on lower activity in Italy and Spain, according to the Google data. Mobility in the region's two biggest economies, Germany and the UK, remained little changed at 8% and 22% below pre-COVID-19 levels.

Meanwhile, the demand recovery for jet fuel remained well behind gasoline and diesel due to ongoing curbs on national, regional, and international travel.

Global scheduled airline capacity for the period starting Aug. 23 was up 0.7% week on week, according to OAG, to average 34.1% below comparable 2019 levels.

Jet fuel and kerosene demand globally will likely remain close to 1 million b/d below pre-pandemic levels by the year end, according to Platts Analytics forecasts, with aviation jet demand not seen fully returning to 2019 levels before 2026.