(Bloomberg) -- Growth in oil demand will hinge on jet-fuel use, which is unlikely to recover until the third quarter of the year, said Mike Muller, head of trader Vitol SA’s operations in Asia.
Jet fuel has been the oil product hardest hit by the coronavirus pandemic in Asia. Demand in the region for other oil products such as diesel and gasoline was also affected but has rebounded. Vitol is the world’s biggest independent oil trader.
Global oil use dropped last year by 9 million barrels a day but should recoup more than 6 million in 2021, Muller said Wednesday at the Gulf Intelligence online conference. “The world has never seen such a transition; managing that will be very challenging,” he said. “The biggest single demand that needs to return is aviation fuel.”
Consumption of jet fuel won’t bounce back without greater immunity among populations as a result of vaccinations and for people who’ve recovered from Covid-19, Muller said.
”Until there’s a roll-out and until we introduce the inevitable -- which is, alongside your regular passport, probably a vaccination pass -- this demand is not set to recover,” he said. “Looking at bookings for holidays in the Europe, the Americas and Asia, it’s all flat on its back still. This must change.”
Uncertainty about a recovery in Asian consumption has prompted refiners in that region to forgo long-term supply contracts in the expectation of higher future prices. As much as 1 million barrels a day of refining capacity in Asia may disappear due to weak profit margins, Arif Mahmood of Malaysia’s state-run Petroliam Nasional Bhd said at the same conference.
“It will open up opportunities for new refineries such as Middle East ones to put products in Asia, or those with excess capacity,” said Mahmood, executive vice president and chief executive officer of downstream business at the company known also as Petronas. Refining margins should improve in the second half of the year, he said.