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Oil Demand Falters On New Wave Of Lockdowns

Lockdown

Road traffic and transportation fuel demand in most of Europe at the start of 2021 is likely at its weakest since the end of the first lockdowns in the late spring, according to Bloomberg estimates and analysts, as more people stay at home with renewed lockdowns to fight soaring COVID-19 cases.

Despite the start of vaccinations in Europe, many countries continue to battle record daily new coronavirus cases and have been on lockdown, again, since before Christmas.  

The UK, where the new strain of the virus was first identified, is under stay at home orders nationwide at least until the middle of February, with people not allowed to leave their local area, and allowed to go out of their homes only for essential shopping, work that cannot be done from home, and once-a-day outdoor exercise.

Germany, the biggest economy in Europe, is also on nationwide lockdown until at least January 31, while the Netherlands will be locked down until at least February 9.  

Amid the strict lockdowns, road use in the UK, France, Italy, and Spain is at its lowest since June and was 37 percent lower last week compared to the levels from before the pandemic, data compiled by Bloomberg showed on Thursday.

According to Rystad Energy, road fuel consumption across Europe has significantly dropped due to the lockdowns in recent weeks.

Still, overall oil demand in Europe is not as low as it was last spring because the frigid winter in most parts of the continent drives up the use of oil products for heating.

Nevertheless, the lockdowns are sapping oil demand again, and consumption is unlikely to pick up materially over the next two to three months, analysts say.  

In its January Monthly Oil Market Report (MOMR), OPEC said on Thursday that restrictions and lockdowns negatively affected Europe’s demand for transport fuels at the end of 2020 and would continue to weigh on consumption in the first quarter of 2021, with “a significant negative impact.”

In Europe, “Uncertainties remain high going forward with the main downside risks being issues related to COVID-19 containment measures and the impact of the pandemic on consumer behaviour. These will also include how many countries are adapting lockdown measures, and for how long,” OPEC said in its near-term expectations of oil demand in Europe.  

By Tsvetana Paraskova for Oilprice.com

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