Italy and Spain Point to Covid-19’s Staggering Oil-Demand Hit

(Bloomberg) --

Nobody knows just how severe the global hit to oil demand has been from the novel coronavirus, but the evidence from Europe’s hardest-hit nations is not good.

Italy and Spain are imposing some of Europe’s harshest restrictions on the movement of people as they battle to control a disease that’s already killed thousands in both countries. The impact of such measures on oil demand is starting to become a little clearer.

On Friday, the Italian refiner Gruppo API SpA said it was halting a small plant in the country’s north indefinitely because demand nationally has tumbled by something like 85%. Today, a Spanish oil pipelines operator gave similar numbers. Gasoline and jet fuel have been among fuels to see big slumps in consumption. Diesel demand is down 61%.

Declines of that magnitude would imply that the two countries, at the epicenter of Europe’s outbreak, might well have seen something like 2 million barrels a day of combined demand disappear almost overnight. That’s at a time when Saudi Arabia and other producers are engaged in a price war, adding large amounts of crude at deep discounts to a saturated global market.

Oil traders and analysts estimate that the global hit to oil demand from the coronavirus -- and the restrictions it’s caused -- could be anywhere between 20 million to 25 million barrels a day. That’s about 20% to 25% of oil consumption in a normal market.

On Tuesday, CLH Group, the Spanish pipeline operator, said gasoline withdrawals from its system are down 83% while jet fuel has slumed 85%. The nation’s refineries do also deliver by truck, but most supplies move by pipeline, making the figures a good proxy for overall demand.

©2020 Bloomberg L.P.