...

Gasoline demand in Europe to be under pressure amid weakening economic growth

Oil&Gas Materials 13 May 2022 12:09 (UTC +04:00)
Gasoline demand in Europe to be under pressure amid weakening economic growth
Laman Zeynalova
Laman Zeynalova
Read more

BAKU. Azerbaijan. May 13. The demand for gasoline in Europe will likely be under pressure from weakening economic growth and surging inflation, Trend reports with reference to Fitch Solutions.

“On the backdrop of the war in Ukraine, we have revised down real GDP growth rate for a number of economies, with EM Europe seeing the largest cuts in forecasts. Eurozone is expected to see a 2.8 percent y-o-y growth in GDP, as opposed to 3.1 percent y-o-y for the US or 4.5 percent y-o-y for China, with consumer inflation averaging at 6.5 percent, similarly to the US. Thus, we could see a more robust demand destruction in Europe, especially in Europe EM over the upcoming months,” Fitch Solutions says in its latest report.

The company notes that diverging demand stories in different regions could lead to wider spread between regional benchmarks, with NY RBOB benchmark settling above Rotterdam and Singapore counterparts.

“The estimated differential between NY RBOB and Rotterdam averaged at USD13/bbl in March-early May 2022, up from 2021 average of USD10/bbl. For Asia, the estimated spread between Singapore benchmark and NY RBOB lingered at USD11/bbl in 2021 to 13/bbl in March-May 2022. That said, we do not expect much wider differential between regional gasoline price benchmarks as they would likely be corrected by arbitrage trade.

However, we expect gasoline crack spreads to settle lower over the upcoming months as demand softens and refiners choose to benefit form extensive margins and increase production of motor gasoline, eroding high level of margin,” the report reads.

Thus, in its current forecast Fitch Solutions expects gasoline crack spread averaging at USD34.7/bbl over the remainder of the year, below current levels of over USD45/bbl.

“We note that since the start of the Russia’s invasion on Ukraine, the diesel crack spread has seen even more robust growth as compared to gasoline crack spread. As a result, we have seen refiners increasing diesel output above 5-year averages (2015-2019) in March 2022, while gasoline output remains consistently below 5-year averages, seeing a sharp decline in late March 2022,” the report says.

---

Follow the author on Twitter: @Lyaman_Zeyn

Tags:
Latest

Latest