-- If the oil market offers clues about the state of the economy, it’s through the prism of two petroleum products: diesel and naphtha. And in Europe, the news is bleak.The former powers trucks, trains, ships and industries including farming and construction. The latter is used by the petrochemical sector to make everything from medical equipment to chewing gum. OECD Europe’s annual consumption of both is set to plunge this year, with naphtha hitting its lowest since 1975.
Part of this year’s demand decline is due to long-term, structural trends. Buyers in the European Union have long been favoring gasoline-powered options over diesel, and electric car sales have also hit consumption.But Europe’s economic malaise is a big factor too. Purchasing managers’ index data show ongoing contractions in the euro zone’s construction and manufacturing, while inflation remains above target.
French road diesel sales fell by 13.4% versus a year earlier in September. In Germany, overall oil demand is expected to drop by about 90,000 barrels-a-day this year, more than any other country in the world — bar Pakistan.Overall, OECD Europe’s diesel-type fuel demand is set to be down by about 380,000 barrels-a-day this year versus the 2019 pre-pandemic level, according to the IEA.The global picture is more mixed.
Going forward, the nation’s distillates demand is expected to stay below that of year-ago levels in the fourth quarter before picking up early next year, according to government forecasts.