Extract from demand:
European oil demand fell y/y by 0.17 mb/d to 15.71 mb/d in July, led yet again by a decline in German demand (-0.29 mb/d y/y) that dragged EU-5 demand lower y/y by 0.13 mb/d. Demand in the other EU-5 countries all rose y/y, led by the UK (+72 thousand b/d). Peripheral European demand ex-Turkey fell y/y for the fifth consecutive month, by 39 thousand b/d, while Turkish demand was flat y/y. The recent hike in consumption tax on petrol, driven by the weakening lira vs the dollar, will continue to weigh on Turkish demand growth—a sharply weakening currency is making imports more expensive, which will inevitably lead to a demand slowdown. Indeed, according to anecdotal reports, Turkey has sharply reduced diesel imports due to a lack of credit and is relying on strategic stocks to meet demand. June European demand was revised lower by 0.1 mb/d, with the y/y decline at an even steeper 0.37 mb/d (vs 0.27 mb/d reported last month).
European diesel demand across the region fell y/y by 28 thousand b/d, the third straight month of decline, in contrast to gasoline demand, which has risen for seven straight months, and by 30 thousand b/d in July. Much of the weakness has been focussed on heating oil, thanks to high prices and low Rhine river levels that restricted full barge flows inland, although in June (the latest detailed breakdown available) German on-road diesel demand also declined, by 62 thousand b/d, despite growing e-commerce. Demand likely remained poor in August as well as we expect agricultural demand to be weak this autumn due to the poor state of the crops in many European countries following the very hot summer. However, we expect heating oil demand to rebound especially amid low inland stocks, with German heating oil differentials moving into a rare premium to ICE gasoil mid-September.
Extract from refinery runs and stocks:
Refinery runs rose m/m by 0.50 mb/d in July to 13.16 mb/d, but remained lower y/y, by 0.18 mb/d. CDU maintenance dropped m/m by 0.28 mb/d to 0.46 mb/d (+19 thousand b/d y/y). Hot weather in July played havoc with refinery operations by straining power grids and reducing the effectiveness of refinery cooling systems. Several European refineries were forced to limit their discharges of used cooling water into lakes and rivers amid fears of increasing already abnormally high water temperatures. Hot weather continued into early August, so runs could come in lower y/y once again. European planned maintenance picks up in September and October—averaging almost 1 mb/d—although works are lighter than the same period last year.