Pandemic Headwinds

Lockdowns lead to oil demand slowdown

Since the first outbreak of Covid-19 in Wuhan in late 2019, China has opted for an aggressive policy to fight the virus. It isolated Wuhan and forced the citizens of the city to stay home for several weeks in early 2020 to prevent the spread of the virus and has targeted a Zero-COVID policy since then. This policy was successful during 2020 and 2021 as the rest of the world went through several waves of infections and China was relatively unaffected. Since then, several vaccines against COVID-19 have been developed and much of the global population has been vaccinated. Many Western countries started relaxing their COVID protocols to varying degrees as the population became increasingly unhappy and vaccination rates reduced the risk significantly.

However, China did not change its policies. In the first quarter of 2022, as more infectious COVID strains have started spreading in China, the country maintained its aggressive approach by ordering lockdowns in several large cities and other areas in the country. These restrictions affect both global supply chains as well as local oil demand. China is the second largest oil consuming country and the leading importer of seaborne crude oil and by far the biggest source of tanker demand. This week, we will look at the impact of China’s lockdowns on the tanker market.

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