Schools, airlines, heating fuel to contain lockdown effects on fuel

Fuel market officials are hoping certain lockdown exemptions, such as the non-closure of primary schools, plus airline traffic and heating fuel demand, will result in smaller losses for the sector compared to the country’s first lockdown earlier this year.

If the latest measures remain as they stand for the lockdown’s duration of at least three weeks, beginning last Saturday, then the decline in fuel sales is expected to be far milder than the 45 percent reduction experienced during the country’s first lockdown, implemented last March, fuel market officials have projected.

Seasoned authorities estimate the fuel market’s reduction in sales could reach 20 percent.

The ongoing transportation by parents and guardians of primary school students to school, continuation of flights, as well as greater heating fuel needs of household members kept in by the lockdown, are all expected to help contain the drop in fuel sales.

Though these factors may offer fuel professionals some consolation, the fuel market is entering uncharted territory as the eventual duration of the lockdown remains unknown.

Also, a large number of households have yet to recover from the financial consequences of the first lockdown. Their budgets will have tightened.

Lockdown relaxation limits fuel sales drop, tourism pivotal

Petroleum product traders have experienced a slight improvement in sales figures since the relaxation of lockdown measures at the beginining of May.

During this 13-day period, the fuel sales drop has been contained to 30 percent compared to regular levels, far better than a slump that reached as low as 60 percent in April.

The pandemic’s impact on diesel has been milder. Sales for this fuel are now down 10 percent after dropping 30 percent in April.

Market officials attributed this increase to the first-stage relaxation of lockdown measures. Also, the general public has remained apprehensive about using public transport, prompting a further rise in the use of private vehicles.

Heating fuel sales were up over the past few weeks compared to  an equivalent period last year as consumers took advantage of a massive drop in oil prices to stock up for next winter.

A new extension granted by the government for heating fuel supply until the end of the month is not expected to make an impact on sales figures. Most consumers have already stocked up and heating fuel prices are now gradually rising.

The pandemic’s development, impact on wider activities and, most crucially, tourism this summer will be instrumental for the future course of fuel sales figures. Current levels are expected to remain unchanged over the next two to three months.

A finance ministry relief measure for payments of special consumption tax and VAT on fuel purchased between May 4 and 19 has not been a great help for market liquidity, officials pointed out.

Fuel demand dives, heating fuel sales supported by low prices

Fuel consumption, down to unprecedented levels as a result of the lockdown, has produced a nationwide gasoline sales drop of 70 percent this month. The slide in gasoline sales has been even steeper in urban centers, falling by as much as 80 percent.

The reduction in demand for diesel has been milder, limited to levels of far less than 50 percent as a result of ongoing agricultural activities around Greece.

On the contrary, heating fuel demand has stood firm against the wider downward trend, supported by extremely attractive prices that have encouraged consumers to stock up as early as now for next winter.

Heating fuel prices have registered a 24 percent drop since the beginning of the year, falling to 0.815 euros per liter from 1.07 euros per liter.

The heating fuel price reduction in Greece is far smaller than that of international oil prices because a considerable percentage of the local retail price is comprised of taxes.

The heating fuel season ends at the end of April, meaning consumers have about two more weeks to place orders at the current prices.

An OPEC agreement reached last week for a 10 percent reduction in output considerably increases the likelihood of a price rebound. The production cutback puts an end to the Saudi-Russian price war.

Domestic fuel market battered, first-half losses projected

Petroleum product traders, overwhelmed by the dramatic drop in fuel sales as a result of restrictive measures prompted by the coronavirus crisis, are making grim forecasts for financial results in 2020.

Losses are projected for the first half while, overall, 2020 will be a bad year, fuel company officials are already admitting.

Fuel demand is seen falling by 40 percent during the final week of March and throughout April, company officials have told energypress.

So far this month, gasoline sales have dropped 20 percent, demand for diesel fuel is down 8 percent, while, on the contrary, heating fuel demand has risen by 22 percent as a result of the ongoing chilly weather combined with the crisis’ enforced domestic living.

Market officials expect fuel sale figures to slip further in the two-month period covering April and May. They have forecast a 50 percent drop.

“It is getting worse by the day for auto fuel sales,” one market official stressed.

Even so, the year’s financial concerns for petroleum firms can still be reversed if restrictive measures are not extended beyond May, some officials believe.

The upcoming summer tourism season will be one of the worst on record, petroleum company officials have forecast, noting that even if the coronavirus outbreak is brought under control in Greece, predictions cannot be made for other countries. The tourism potential for June has already been written off, the sources added.

Fuel price plunge pressuring refineries, opportunities seen

The plunge of international crude oil prices is impacting Greek refineries and local fuel trade, while, worse still, market forecasts are impossible to make, even for the short term.

Hellenic Petroleum (ELPE) and Motor Oil, Greece’s two refinery groups, are being tested by the fall of Brent prices to levels of around 30 dollars per barrel. Highlighting this challenge, unleaded 95 octane fuel prices have dropped to less than 1,000 euros per cubic meter (including surcharges before VAT) for the first time in many years.

This represents a drop of more than 100 euros compared to prices on March 9, dubbed “Black Monday” as it was the worst day in markets since the financial crisis, a result of the outbreak of the oil price and output level war between Russia and Saudi Arabia, along with the coronavirus spread’s impact on demand.

The drop in prices is seen continuing. Domestic fuel demand is falling as a result of the Greek government’s broadened enforcement of restrictive measures aiming to contain the coronavirus spread. Local transportation needs have subsequently dropped dramatically, while the only other viable option left for Greek refineries, exports, has been canceled out by plunging fuel demand internationally. Borders have closed and airlines are limiting flights.

The cost of fuel stocks, purchased at far higher prices, is a big concern for both ELPE and Motor Oil. This cost, however, can be partially offset by opportunities currently available for lower-cost production.

On a more positive note, both refineries reduced their loan servicing costs prior to the crisis. This is particularly so for ELPE as the petroleum group was pressured by high borrowing costs. Motor Oil has traditionally pursued a more conservative borrowing policy.

Both refineries will need to take extremely cautious steps amid these highly unpredictable market conditions, analysts agree.

Pros and cons for refineries, fuel demand sliding

The drop in oil prices as a result of the price war between Saudi Arabia and Russia and the coronavirus spread presents a major challenge for petroleum firms.

Brent crude’s 30 percent plunge last Monday inflicted major damage on companies stocked with petroleum products, Greek refinery officials informed, as these products had been  purchased at previously higher prices.

The market volatility, however, has also created opportunities, namely lower-cost supply of raw materials without the need for high working capital. Operating costs have dropped considerably.

The major concern at refineries and petroleum product trading companies is demand, or fuel consumption, expected to drop amid the growing number of mobility restrictions being imposed by governments around the world in an effort to contain the coronavirus outbreak.

Demand for gasoline and diesel has dropped since last weekend as a result of reduced transportation needs. This decline in fuel demand is expected to continue following latest preventive measures. The Greek government yesterday announced a measure closing all educational institutions for 15 days as of today.

Fuel demand levels during the year’s first two-month period were unchanged compared to a year earlier, but the month of March has already shown first signs of a decline. Many airlines are cancelling flights.

Petroleum companies fear a further deterioration from May onward, when Greece’s tourism season begins in earnest.

For the first time since 2009, the International Energy Agency has forecast a drop in petroleum consumption for 2020.

Overall fuel sales slump by 4% in first four-month period

Overall fuel demand fell by 4 percent in the first four-month period compared to the equivalent period last year, extending the market’s recent run of lower consumption, data has shown.

Gasoline demand dropped by 4 percent in the first four months of 2019 compared to a year earlier, while diesel sales were down by 2 percent.

The overall 4 percent decline comes despite strong demand registered for heating fuel earlier this year as a result of the cold winter.

The lower diesel demand has been attributed to a slowdown in major projects, investments and building activity.

Overtaxation is seen is the main cause behind the drop in demand for gasoline, whose price levels have remained particularly high in the Greek market despite a drop in international prices.

Ongoing illicit fuel trade in Greece is affecting fuel-related tax revenues, depriving the State of roughly 300 million euros per year.