Some of the world’s largest oil producers are starting to see evidence of a rebound in demand from China, even as other economies around the world remain hobbled by the coronavirus.
While it’s still early days into the Chinese recovery, limited initial sales data was encouraging, Irving, Texas-based Exxon Mobil Corp. said in its first-quarter earnings presentation. In a major milestone on April 8, the Asian nation lifted the lockdown on Wuhan -- where the pathogen first emerged -- and is tentatively firing up its economic engine.
Prior to that, strict nationwide restrictions meant the world’s second-largest economy recorded its deepest contraction in decades over the first quarter. As the country reopened, BP Plc’s soon-to-be chief financial officer, Murray Auchincloss, said on an earnings call earlier this week that demand has started to recover in China in its lubricants division in recent weeks.
BP Chief Executive Officer Bernard Looney told CNBC that the company was seeing its road transportation business in China back to 90-95% of pre-coronavirus levels, while aviation had recovered to about 50%. Exxon gave projections of a quick recovery across finished lubricants, polyethylene and retail fuels in Fujian province.
Weakness Persists Elsewhere
BP’s Auchincloss cautioned, however, that sales remain down in Europe, the U.S. and India, regions that are still under various stages of lockdown aimed at curbing the spread of the virus.
Royal Dutch Shell Plc also highlighted a potential recovery, saying that there were a few “greenshoots” in its business in places like China where demand volume at some retail stations is above pre-Covid-19 levels.
“That gives a signal that the potential for a rapid recovery in some parts of our businesses and in certain circumstances can be good,” Shell CFO Jessica Uhl said on its earnings call.
The companies were careful to caveat that while the initial signs were positive, there is a lot of uncertainty ahead.
Shell CEO Ben van Beurden said there could still be a second wave of infections in China. The data from the Asian nation is a bit of a guide to the path in demand recovery, BP’s Looney said, “but the reality is we really don’t know.”
China’s faster-than-anticipated resumption prompted Bloomberg Economics to increase its GDP growth forecasts for the country to an expansion this year of 2%, up from 1.4% in its previous forecast, yet far below the actual growth rate of 6.1% in 2019.
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