China oil demand resilient despite lockdowns - Rystad Energy oil market note

China’s nationwide road traffic has so far been resilient despite latest round of lockdowns.

Reported Covid-19 cases have reached new highs in mainland China, with daily infection numbers surpassing their previous April peak and surging above 40,000 on 28 November.

The latest surge of infections has led to new lockdowns and movement restrictions of varying magnitude being imposed across several of China’s largest cities, including Guangzhou, Chongqing and Beijing.

This most recent lockdown wave, ramping up around mid-November as confirmed Covid-19 infections have continued to steadily rise, comes only weeks after the Chinese government showed the first signs of easing the country’s zero-Covid policy by slightly relaxing travel quarantine rules.

Real-time data on mainland Chinese road activity indicates a small downturn in country level road traffic during the fourth week of November, sliding from 97% to 95% of 2019 levels.

By comparison, the country level road traffic index dropped to around 90% in April 2022 amid the large-scale Shanghai lockdown.

Over the last few days, we have already seen a rebound in road activity as certain short-lived lockdown measures have been eased and the traffic index has thereafter climbed back to 98%.

It is nevertheless worth noting that Chinese road traffic remains well below comparable 2020 and 2021 levels as persistent lockdowns and China’s growth slowdown weigh on road traffic.

Municipal and city level road traffic shows the varying effect of the latest lockdown measures on road activity.

Guangzhou, Chongqing, Beijing and Shijiazhuang have seen the largest declines in road traffic during the recent lockdowns, sliding down to between 75% and 85% of 2019 levels.

Shanghai, on the other hand, has not witnessed any slowdown in road traffic over recent weeks given the city’s less heavy-handed movement restrictions compared to its large April lockdowns.

Even with daily Covid-19 cases continuing to climb, all the selected cities have already shown upticks in daily traffic activity over recent days, although not yet returning to activity levels witnessed before October (apart from Shanghai).

Daily aviation activity also shows a minor dip over the last week, sliding to 33% of 2019 levels, likely as a result of the latest movement restrictions.

However, the relative scale of this downtick is rather small, given that Chinese aviation activity has been stagnating below 35% already since mid-October.

In essence, so far the latest round of lockdowns appears to be mimicking previous ones, with nationwide road traffic only marginally affected while selected provinces undergoing comparatively severe lockdowns to try and suppress Covid outbreaks.

However, the street protests against lockdowns emerging in various parts of the country are a novelty and could become a source of further disruption in the coming days.