Domestic demand for motor fuels in Vietnam is expected to weaken further in the near term as the country battles to control the ongoing spread of a new wave of coronavirus, industry sources told S&P Global Platts.
The concerns come as the country's business hub, Ho Chi Minh City, announced late June that social distancing measures would be extended indefinitely, as the country struggles to contain a fresh spike in cases amid the discovery of several new clusters in the city."This new wave in Vietnam is very serious. It has spread quickly and the government is doing all it can to contain it," one market source based in Vietnam told Platts.
The number of new cases in Vietnam exploded in May after pockets of infections were discovered in the regions of Bac Ninh and Bac Giang, home to large factories belonging to the likes of Samsung Electronics and Foxconn facilities, among others.
Since then, Vietnam's COVID-19 cases has remained on an uptrend, with the number of new infections hitting a record high 1,102 on July 5, according to data from the John Hopkins University.
"Travel has come to a standstill. [Gasoline] demand has plunged, while stocks continue to pile up," the Vietnam-based source noted.
The impact of the movement curbs on driving activity has been severe, sinking to between 30% and 40% below baseline levels as of June 9, levels not seen since February, mobility data from Apple showed.
Tepid gasoline importsOn the gasoline front, the plunge in domestic driving activity has already tapered import activity from domestic buyers.
In May, Vietnam's gasoline imports slumped to a 14-month low of 53,293 mt, according to preliminary data from Vietnam Customs, down sharply from the three-month high of 120,403 mt recorded a month earlier in April.
"Vietnam in the past was a regular importer of around three to four MR cargoes per month, but since the COVID-19 pandemic, buyers [from Vietnam] have lowered their demand. Even exporting when they have too much," another Singapore-based market source said.
To that end, Nghi Son Refinery & Petrochemical was spotted having offered up to two 30,000 mt cargoes, with one cargo to have loaded over June 15-25 and a second sometime over end-June to early-July, according to N open tender seen by Platts.
"When the Vietnamese refineries start to sell cargoes, It is a sign that their domestic fundamentals are terrible," a third gasoline source said.
Uneven demand for gasoilVietnam's demand for gasoil, on the other hand, has remained largely steady as the government prioritizes the continuity of the country's manufacturing and industrial sectors due to economic concerns.
Vietnam is home to several major facilities that produce everything from electronics to automobile parts, to packaging material for major food and beverage brands, with these factories playing a key role in the global supply chain.
Apart from being channeled into the transportation industry, gasoil -- or diesel oil -- is also used in the industrial and manufacturing sectors.
With this sector still in operation through the latest outbreak, market sources said that this has become the floor for Vietnam's gasoil demand and prevented further demand destruction caused by coronavirus-related movement restrictions.
Latest data from Vietnam's customs department showed that the country's gasoil imports in May rose 13.66% on the month to a 10-month high of 489,152 mt, defying widespread expectations that gasoil inflows would decline due to the spike in COVID-19 infections.
Still, some sources said that headwinds remain for the middle distillate due to tighter restrictions enforced in June.
"Transportation became quite difficult between Ho Chi Minh city and surrounding provinces, and streets in Ho Chi Minh have been deserted since the end of May and all through June and less vehicles [have been] seen running on the streets," a Vietnam-based source said, adding that June typically marks the start of the rainy season when demand for oil products decline.
