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China: The Ground Truth
There are signs that China is successfully returning to more normal human activity and oil demand. Chinese state reports suggest refinery runs have bounced back 11% MoM. However, the recovery is patchy across major refined products. While gasoline has staged a strong recovery, jet fuel demand continues to lag. Although I expect the recovery in China to be the most linear and quickest, relative to other global regions, I would caution against using China as a blueprint for the rest of the world as the Chinese government plays a larger role in societal activity than in most other countries.
Chinese Port Activity and Vehicle Traffic
Port activity has returned to 90% from levels seen in previous years. Shipping traffic remains impacted by softer overseas orders or delays as major trade partners like the US and Europe continue to grapple with the coronavirus. On the road, traffic patterns between the weekend and weekday differ greatly, with discretionary weekend travel well below normal levels. Furthermore, higher than normal traffic patterns suggest that many are choosing to commute in congestion rather than use public transport.
Chinese Flight Activity – The Polarized Path to Normalization
Before COVID-19, air travel had been surging in China, which comprises 13% of global jet fuel demand, and is also the world’s number one engine for aviation fuel with annualized growth of 70 kb/d over the past five years. As with road traffic, most business travel or cargo flights resumed, but discretionary air travel remains minimal.
For a deeper dive into the oil market, read the full research report “Oil Strategy -The Data Science Lens into China’s Reboot ” authored by Michael Tran. For more information, please contact your RBC sales representative.
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