Road traffic has thinned across Asia at the start of the year as the highly contagious omicron variant of the coronavirus sweeps through the region, flashing a bearish signal for oil demand.
Less vehicles have transited through most capital cities so far this month than in December, according to mobility data from Apple Inc., as authorities renew restrictions to curb the spread of the virus. Omicron recently breached China’s tough Covid defenses, prompting Goldman Sachs Group Inc. to reduce its 2022 growth forecast for the nation. Flight cancellations are also mounting in Asia.
While the outlook looks bleak, omicron so far hasn’t had a big impact on the oil market. Headline crude prices have maintained an upward trend, and while profit margins from making gasoline in Asia have softened since mid-December, they’re still more than double compared with a year earlier.
Omicron’s emergence in China—the world’s biggest crude importer—is the biggest concern for the market. That’s led to the lockdown of Anyang, a city of 5 million people, with the nation also battling an outbreak of the delta variant in Xi’an. While Apple doesn’t provide data on China, local provider Baidu Inc. showed that road congestion in Xi’an was 39% lower on Jan. 11 compared with a year earlier. In Beijing, congestion was up 16% over the same period.
In India, restrictions have been reinstated in the capital as infections surge, although the federal government has avoided instituting nationwide curbs. Average driving activity over the first ten days of January was 61 percentage points lower than in December, according to Apple, which counts the number of requests made to Apple Maps for directions to calculate mobility.
Less cars are traversing roads in other regional capitals such as Tokyo, Manila and Kuala Lumpur, according to Apple data. The only outlier was Vietnam’s Ho Chi Minh, which has so far recorded an uptick in traffic.
Omicron has turbocharged the infection rate, leading to curbs on air travel globally. China has blocked some flights from the U.S., while the Philippines and Hong Kong canceled fixtures to stem the spread. Worldwide commercial flights over the seven days ended Jan. 9 were about 17% and 21% below the same periods of 2019 and 2020, respectively, according to FlightRadar24.
The cancellations have led to a reduction in jet fuel demand estimates for Asia from BloombergNEF over the first six months of 2022. While air travel is expected to be weak over the first quarter, emerging data pointing to omicron being less severe presents a strong case for the easing of restrictions and renewed travel in the coming quarters, according to Fitch Solutions.