The reemerging COVID-19 outbreak in Beijing is expected to dampen China’s oil and natural gas demand, industry players said. The capital city has initiated neighbourhood lockdowns, flight cancellation, and school closure, while actively tracing suspected cases. Some neighbouring provinces have also taken strict restrictions on people coming from Beijing. So far, the impact on oil and gas demand has been minimal thanks to the government’s effective measures.
The new outbreak is expected to push China’s gasoline demand in June to 2% below the estimated consumption of about 3.4 million bpd. Gasoil demand is seen to be 0.8% lower than the estimated 3.6 million bpd for the month, as transportation declines while some construction work is suspended. Meanwhile, jet fuel demand is expected to be 5% lower than the forecast. Last year, Beijing contributed to 10% of China’s total jet fuel consumption of 980,000 bpd.
In the LNG market, Chinese importers are cautious about purchasing cargoes due to an uncertain outlook on downstream demand amid a possibility that Beijing is put on lockdown again. At the same time, inventory levels at terminals in northern China remained high, with PetroChina and CNOOC expected to divert shipments to southern ports.
