25 July 2024 Vortexa
As of 22nd July, Europe’s seaborne crude/condensate imports in July (days 1-31) are observed at 10.5mbd, the lowest level since October 2021. It represents a 100kbd m-o-m decline and 1mbd y-o-y decline. This decline in crude import demand comes at a time where imports would be expected to be higher in the year, given its the summer season (peak demand).
Europe averaged 11.3mbd in seaborne crude imports across July 2021, July 2022 and July 2023, highlighting that Europe’s current imports are 800kbd below that reference. One factor driving this decline could be weakness in diesel cracks compared to recent years, which were assessed at $15/bl as of 22nd July, $13/bl lower than the same point in 2023 and $7/bl lower than in 2022 (Argus Media). On the other hand, these cracks may have been higher as a result of sentiment of short-supply resulting from the EU-ban on Russian diesel, rather than market fundamentals. In the three years prior to the war (2019-2021), diesel cracks averaged $9/bl (Argus Media). Therefore, the current levels are still markedly above the pre-war average.
Another factor contributing to the weakness in Europe’s crude import demand could be Europe’s ample supplies in onshore inventories, which are 480mb in July. Although this is the highest level observed since February 2023, from a seasonal perspective, these levels are at the range expected at this time of year given refiners would be expected to produce more products (diesel, gasoline) for summer season. It’s 8mb higher than the same period last year but 10mb lower than levels observed in 2022, suggesting on average, European refiners have access to ample supplies to draw from, if needed.
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