Oil Strategy – The Data Science Lens into China’s Reboot

By Michael Tran
Published May 15, 2020 | 1 min read

Though the world’s second largest economy has led the post-COVID activity rebound, oil demand remain far from normal in some instances. However, using a real time data approach with in-house simulation models, geolocation and satellite imaging methods from RBC Elements, our data science team, we believe Chinese oil demand is bouncing back and expect it to recover nearly 9% this quarter, 17% in Q3 and 25% in Q4 relative to the lows seen during the first quarter of this year.

Required Conflicts Disclosures


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.

For Required Conflicts Disclosures, click here. These disclosures are also available by sending a written request to RBC Capital Markets Research Publishing, P.O. Box 50, 200 Bay Street, Royal Bank Plaza, 29th Floor, South Tower, Toronto, Ontario M5J 2W7 or sending an email to rbcinsight@rbccm.com.

Michael Tran

Michael Tran
Managing Director, Energy Strategist, Global Research

COVID-19ChinaCoronavirusData ScienceEconomyEnergyOilRBC Elements