Extract from demand:
European oil demand fell in July for the fifth straight month, down y/y by 0.44 mb/d to 15.6 mb/d. Demand fell across the EU-5 countries, except for France (+22 thousand b/d y/y) and Spain (+25 thousand b/d y/y). Italy led the decline (-86 thousand b/d y/y), as its economy continued to weaken. Though July’s slowdown in demand growth is in line with recent official economic data, which has remained lacklustre throughout the region, EU-5 final numbers could well be revised higher keeping in line with recent trends of upward revisions and with preliminary data readings which were strong. Indeed, European demand for June was revised higher by 0.1 mb/d to show a y/y decline of 0.38 mb/d, compared to previous estimates of a 0.48 mb/d y/y decline. Additionally, April demand was revised upwards again, this time by 30 thousand b/d, to 15.40 mb/d. July demand outside the EU-5 fell by 74 thousand b/d y/y, while Turkish demand was down by 0.28 mb/d y/y from a record high base. Given the weak economic backdrop, we expect demand to have fallen again in August.
Extract from refinery runs:
Refinery runs rose by 0.80 mb/d m/m to 13.09 mb/d in July but came in lower y/y by 0.12 mb/d. The m/m increase in runs followed a 1.1 mb/d reduction in CDU maintenance and disruptions, as seasonal works lapsed and flows via the Druzhba pipeline to affected German and Polish refineries resumed, rising to close to 1 mb/d. We expect refinery runs to average 12.90 mb/d across Q3 19, up by 0.55 mb/d q/q, as refinery margins recovered on rising diesel cracks, which will incentivise runs ahead of IMO 2020.
Margins were boosted in July through mid-August amid strong transatlantic gasoline demand following the shutdown in the 0.35 mb/d Philadelphia Energy Solutions refinery, as well as a marked slowdown in diesel flows to European ports, which has led some refiners to defer works initially planned for this autumn into 2020-21. The east-west arb remained closed throughout most of the summer on strong Asian demand while Russia’s scheduled ULSD exports via its Baltic port of Primorsk have been hamstrung ever since the 0.18 mb/d Antipinsky refinery filed for bankruptcy. Even as flows to Primorsk from Antipinsky—now under the management of SOCAR Energoresurs—resumed in late July, scheduled exports have remained weak amid hefty maintenance. Once global autumn maintenance winds down and refineries gear up for IMO 2020, flows to Europe will pick-up again. However, the recent attack on Saudi oil processing facilities will likely keep diesel flows from the Middle East to Europe tight in the short-term.