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China’s Traffic Thins in Some Cities as Virus Threatens Oil Use

China’s Traffic Thins in Some Cities as Virus Threatens Oil Use

Traffic has thinned on some of China’s typically busy city roads as the nation faces a coronavirus resurgence that’s raising concerns about near-term fuel demand in the major Asian consumer.

Congestion in Beijing was down 20% from a week earlier at 8:30 a.m. local time on Friday, while the volume of traffic jamming roads in other cities such as Shanghai was marginally lower, according to data from Baidu. Authorities have placed restrictions on movement in some regions to try and contain the fast-spreading delta variant, which has swept across the globe.

China’s Traffic Thins in Some Cities as Virus Threatens Oil Use

“For those provinces and regions with severe cases, such as Jiangsu, we will see a hit in gasoline and diesel demand,” said Jean Zou, an oil analyst with Shanghai-based commodities researcher ICIS-China. Consumption of the key transport fuels may decline 10% to 20% from a month earlier, Zou added.

China has suspended flights as authorities rush to close some cities during the peak summer travel period. The major crude importer has managed to contain sporadic outbreaks in the past, but the spread of delta is causing jitters in the market as it leads to lockdowns throughout Southeast Asia.

Authorities in China will suspend cross-city bus, taxi and ride-hailing services in regions with medium-to-high virus risk, the Ministry of Transport said. The nation had 144 areas, including at least 20 cities, that met that risk threshold as of Aug. 4, according to the National Health Commission.

China’s Traffic Thins in Some Cities as Virus Threatens Oil Use

Restrictions have knocked out around 150,000 barrels a day of gasoline demand, and that could potentially rise to 200,000 to 300,000 barrels a day in the next couple of weeks if the situation deteriorates, according to a note from FGE. Average motor fuel consumption this month is expected to be 80,000 barrels a day lower than July, while diesel demand is facing downside risks of 50,000 to 100,000 barrels a day, the industry consultant said.

“If the government is fast to curb the spread, short-term restrictive measures will cut August demand,” said Sengyick Tee, an analyst with Beijing-based SIA Energy. However, consumption will likely rebound next month, he added.

©2021 Bloomberg L.P.

With assistance from Bloomberg