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- It took the global oil market two months to recoup 12 percentage points of lost demand—hardly a V.
- The inability to scale up refinery runs and poor refining margins globally confirm our conclusion that demand has been slow to normalize.
- In terms of oil products, US gasoline demand is one of the biggest casualties as we estimate it will average around 8.1 mbd this month, still 17% lower yoy.
- Given that driving accounts for 45% of global oil demand across all fuel types and the US holds the crown with its 27% share of global road demand, we develop a framework to more precisely forecast the medium- term recovery in US gasoline demand.
- We conclude that US gasoline demand will exit 2020 averaging around 8.4 mbd, keeping global gasoline demand around 25 mbd in 4Q’20, or 5% lower yoy.
- US gasoline demand will likely only breach 9 mbd again in June 2021, according to our estimates.
- We adjust our model accordingly, resulting in global oil demand averaging 96.0 mbd in 4Q’20. This compares to around a 97 mbd consensus view.
- We boosted their 2Q demand estimates as a growing amount of reported statistics point to the previous outlook being a bit overly bearish. Looking ahead, Chinese demand is seen averaging just above 14 mbd in June and July, essentially pulling even on a yoy basis next month, yet global demand will still likely average about 12% lower yoy in June (88.0 mbd) and 10% lower yoy in July (91.2 mbd) as the rest of the world lags China’s recovery.
Foreseeing the puzzling swings in this energy commodity, we recommend long hedges of CME WTI of June tenors, simultaneously, shorts in CME WTI futures of July’20 delivery for the major downtrend. Thereby, one can ensure directional positions amid macroeconomic turmoil as emphasized in our recent posts. Courtesy: JPM
