Energy demand contraction triggered by Covid-19 lockdown measures has drastically reduced U.S. fuel consumption, but a cold winter could boost heating oil consumption as more people continue to work from home, the Organization of the Petroleum Exporting Countries (OPEC) said Tuesday.

Refinery Intake By Region

The oil cartel issued its global winter forecast in the latest Monthly Oil Market Report (MOMR). 

Specifically in the United States, the “prospects for a colder-than-normal winter could add support” to overflowing fuel stocks, researchers said. “However, tele-working will negatively impact transportation fuels.”

Product stocks still “remain exceedingly high, which will pressure distillate margins. Moreover, the switch to winter-grade gasoline requires additional volumes of naphtha-based blending components.” 

Globally, refinery intakes through the first nine months of this year fell year/year (y/y) by an estimated 7.5 million b/d, according to the MOMR.  

“So far, product markets in 2020 have suffered tremendously due to the demand contraction triggered by the Covid-19 pandemic,” researchers said. “Lockdown measures have drastically reduced fuel consumption, particularly for jet fuel, as the air transportation sector was hit hardest.”

Refinery intakes in May fell to historic lows of 68.7 million b/d, versus the pre-pandemic level last December of 83.1 million b/d.

“Since then, the easing of lockdowns along with improvements in road and air transport activities, linked to the summer season, have only provided limited improvement, with refinery throughputs still averaging below year-ago levels,” researchers said.

“The ongoing regional resurgence in Covid-19 infections will continue to negatively impact market sentiment until such a time as a vaccine is made available.” 

With the coronavirus impacts continuing, researchers said several trends in the global economy have become apparent. Economies that were able to implement “effective Covid-19 containment measures” in the first half of 2020, in combination with the ability of strong stimulus measures, have to date fared better.

Interestingly, OPEC researchers said even in the event of a “rapidly marketable vaccine, the impact of Covid-19 will be felt on a larger scale than previously envisaged in 2021, as the global economy continues to adapt to the ‘new normal.’”

The changes could be accompanied by structural adaptations in the global economy that range from “supply chain alterations to a rise in digitalization, more home office-bound working and less business-related travel.

“Moreover, it is expected that debt levels across the world will continue rising. This includes the U.S., with the potential for a further softening impact on the value of the U.S. dollar.”

The labor market also may continue to suffer, with economies that are “flexible and dynamic” better equipped to weather the storm.

“By taking these trends into consideration, the 2020 global economic growth forecast remains unchanged at minus 4.1% y/y,” with global growth in 2021 revised down slightly to 4.6% y/y.