"A second wave or a continued set of outbreaks that has an impact on demand is ... the most likely shock that the oil market needs to be considering in the next 12 to 24 months," Giovanni Serio, global head of research at commodity trader Vitol, said at the virtual Asia Pacific Petroleum Conference.
Global oil demand shrank by a record 22 million barrels per day (bpd) in April, when 4 billion people were in coronavirus lockdowns, said Arif Mahmood, executive vice president and chief executive of downstream at Malaysia's Petronas.
And global demand is expected to fall by 8.1 million bpd this year to 91.9 million bpd, the International Energy Agency said.
Any COVID-19 resurgence during winter in the northern hemisphere, however, could generate another shock, said Chris Midgley, head of analytics at S&P Global Platts.
"There's a real risk of that. We're seeing increased infection rates right now," Midgley said.
Vitol's Serio said disruptions to the recovery would have to be matched by strong producer and refiner discipline to rein in supplies as well as by ready storage for surplus oil.
Demand for jet fuel, however, isn't likely to recover until much further out as it will take longer for air travel to return to pre-pandemic levels.
Malaysia's gasoline and diesel consumption have returned to 2019 levels, although the "jet fuel market is still very depressed" as the country's borders are closed, Arif said.
"Even if (borders) are open, it will still take time for the market to recover," he said.
Global jet demand has dropped from about 10 million bpd to around 3 million bpd, said Ben Luckock, co-head of oil for commodity trading company Trafigura.
It's important that refineries be ready to shift production away from jet fuel, said Mark Quartermain, Royal Dutch Shell's head of crude trading, citing the oil major's Pernis refinery in the Netherlands as an example.
"We've all been facing in the trading and supply world difficulties dealing with the loss of jet demand, and in that regard we were able to help our refinery retool itself, changing the yields," Quartermain said.
(Reporting by Florence Tan, Roslan Khasawneh and Shu Zhang; Editing by Tom Hogue)
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
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