European January oil demand rose by 0.75 mb/d y/y to 14.64 mb/d, following a 0.2 mb/d upward revision to December 2016 data. Euro-5 demand rose by 0.40 mb/d, led by superbly strong growth in France (+0.22 mb/d), as cold weather (HDDs were 32% higher y/y) buoyed heating demand (distillates demand rose y/y by 0.14 mb/d, with heating oil demand up by 15%). German demand rose by 95 thousand b/d, despite consumers continuing to destock—consumer heating oil stocks fell to 57% in January, a 20-month low—limiting end-user buying and as the outage at BASF’s Ludwigshafen complex restricted naphtha demand. The complex is slowly returning to full capacity while anecdotal reports also suggest end-user buying is starting to pick back up as tertiary stocks are depleted. Peripheral European demand rose by 0.21 mb/d, as severe cold weather gripped the Eastern Med causing Med distillate prices to spike. Turkish demand rose sharply y/y by 0.15 mb/d, aided by diesel demand growth of 99 thousand b/d. Across Europe, the main product to have benefitted was diesel, higher y/y by 0.45 mb/d. With HDDs higher y/y by 10% across Q1 17, we expect European Q1 17 distillate demand to rise y/y by 0.26 mb/d, despite significant destocking. And, with end-user demand up, buying should be strong in Q2 17 and Q3 17. Naphtha demand fared well in January, higher y/y by 0.1 mb/d and should post stellar gains in Q1 17, as rising LPG prices encourage crackers to switch to naphtha by 0.2 mb/d.
European refinery runs totalled 13.08 mb/d, higher y/y by 0.42 mb/d but should fall to 12 mb/d this month as spring works peak at nearly 1.8 mb/d, helping to draw products stocks. January diesel stocks rose seasonally (+20 mb); gasoline rose (+3.7 mb) despite high exports to the US.