Extract from demand:
European oil demand reversed into y/y declines in February by 0.56 mb/d to 15.2 mb/d after a rebound in January, with y/y growth revised higher by 0.25 mb/d to 0.48 mb/d. Demand fell across all EU-5 countries, although Italy’s y/y drop of 0.24 mb/d seems a bit dubious to us and is likely to be revised higher. Demand outside of EU-5 also suffered, but declines eased to 50 thousand b/d while Turkish demand rebounded ever so slightly (2 thousand b/d) after five straight months of hefty declines (average 0.15 mb/d). In general, February demand was weighed down by warmer-than-usual weather and continued economic weakness. After a cold January, heating degree days (HDDs) in Germany were 30% lower y/y and 14% below the five-year average in February. Demand was no better in March, as HDDs were 28% lower y/y and 12% below the five-year average. France exhibited similar patterns, with HDDs 37% higher y/y in January and 13% above the five-year average but 28% and 21% lower y/y in February and March respectively. Indeed, heating demand in the two big continental economies—Germany and France—was probably the lowest since 2014 in February and March, and the 30% surge in oil prices since the start of February likely further discouraged resupply buying by consumers.
Extract from refinery runs:
Refinery runs rose by 0.13 mb/d m/m to 13.03 mb/d in February, flipping to y/y growth of 0.43 mb/d on stronger-than-expected runs in Germany and the UK, though we suspect the UK reading will be revised next month given works at Grangemouth. Planned CDU maintenance increased by 0.34 mb/d m/m to 0.72 mb/d (-0.21 mb/d y/y) in February. The m/m increase in works was led by Spain (+0.12 mb/d) amid planned works at Petronor’s 0.12 mb/d CDU at its Bilbao refinery, and Cepsa’s 0.12 mb/d capacity CDU at its Gibraltar facility. In Bosnia and Herzegovina, maintenance grew m/m by 0.11 mb/d as Zarubezhneft closed its 0.11 mb/d Brod refinery for planned works which are to last at least a full year. The rise in total runs is also at odds with the weakness in February margins. That said, we believe Europe may be less able to react to spot margins than before as the proportion of longer-haul crude imports (such as from the US) grows. Consequently, there may be a delayed reaction to the changes in margins as crude bought in earlier cycles still needs to be processed when the market is backwardated. In April, even though planned works ease, strikes at Shell’s 0.4 mb/d Pernis refinery are expected to weigh on runs. Runs at the refinery are reported to have fallen to 65% of capacity according to the union, as one of the facility’s gasoil hydrotreaters has been shut down on 15 April.