Mideast Gulf gasoline demand on road to recovery

Gasoline demand in the Mideast Gulf is picking up after an unprecedented fall in the first half of the year, with easing Covid-19 related restrictions and increasing driving activity suggesting the road to recovery may not be that long.

At the peak of the restrictions, gasoline demand in the six Gulf Co-operation Council (GCC) countries fell by a combined 462,000 b/d, or 52pc, compared with April 2019, according to estimates from consultancy FGE. Around a half of this is attributable to region's biggest gasoline consumer, Saudi Arabia. Demand there fell to multi-year lows and was down by 230,000 b/d year-on-year in April, according to the Joint Organisations Data Initiative (Jodi).

But demand has started to pick up at a rapid pace after regional restrictions were eased. Saudi Arabia on 21 June lifted a nationwide curfew and ended all Covid-19 related measures that had been in place since late-March. Driving activity increased by 19pc between 20 and 21 June, to 93.6pc of a 13 January baseline, according to mobility data that technology firm Apple collates from direction requests by users of its apps. So far in July, this data show driving activity in Saudi Arabia averaged above the baseline, at 103pc.

Driving activity in the second biggest GCC gasoline consumer, the UAE, has averaged 10pc below the baseline in July, as the second most populated emirate Abu Dhabi continues to restrict movements.

As social distancing rules prevail, people now tend to use private cars more. Limited opportunities for international travel encourage local tourism and domestic travel in the GCC, which in turn lifts road transport fuel demand.

The road ahead

Gasoline demand in the six Mideast Gulf countries will probably continue to recover in the short- and medium-term. FGE forecasts levels to return to those seen before the pandemic by the fourth quarter.

It sees GCC demand falling by around 145,000 b/d, or 16pc, from 2019 to 786,000 b/d this year. Around 70pc of this decease will stem from demand loss in Saudi Arabia, and 15pc from the UAE.

Gasoline demand in Kuwait and Oman will contract moderately by 12pc year-on-year each in 2020. Oman recently tightened restrictions ahead of the Eid al-Adha holiday, which may pull demand even lower.

Bahrain and Qatar, which consumed on average 18,000 b/d and 44,000 b/d of gasoline last year, did not impose strict curfews or lockdowns and demand in these countries will return to pre-Covid-19 levels by August. Qatar is following a four-phase schedule to fully reopen its economy by 1 September.

The number of coronavirus cases in GCC countries continues to increase, with 588,390 people infected to date. Of 92,058 active virus carriers across the six countries, 50pc, or 46,000, are in Saudi Arabia. With the pandemic not showing signs of retreat the risk of tightening of restrictions remains, which could further dampen regional transport fuel demand.

By Ieva Paldaviciute