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China’s oil demand is expected to be 1 million barrels per day (bpd) lower in the next two months than previously expected due to the rising number of COVID cases in the world’s top crude importer, Goldman Sachs says.
Still, the overall hit to global oil demand will be more moderate, the investment bank said in a note carried by Reuters. Goldman Sachs analysts now see total global crude oil demand at 97.8 million bpd over the next two months, compared to an estimated 98.4 million bpd in July.
China imposed in the past two weeks widespread restrictions on travel in major cities, including Beijing, to contain a resurgence in COVID cases of the Delta variant. As with the previous outbreak, which China stifled with a complete lockdown, the rise in infections is affecting movement and, consequently, fuel use.
China is also testing tens of millions of people and is suspending airline and long-haul bus trips from cities with reported COVID cases in an attempt to eradicate early the Delta variant outbreak in the country. The capital Beijing is also tightening travel restrictions, adding to the already growing concerns about fuel demand in the top oil importer in the world.
“The base case remains that the Delta wave will impact demand, including in China, for only two months, consistent with prior cycles, including most recently in India,” Goldman Sachs said in the note carried by Reuters.
The bank sees the Delta variant impact as a short-lived drag on demand in China, while oil demand in Europe, India, and Latin America continues to pick up.
Goldman Sachs remains bullish on oil, still seeing a deficit in the market. This deficit could be reduced by 1 million bpd in the next few weeks with the Delta variant surge, but the effect will be transitory, according to the bank.
