Argus Live: No full Europe product demand recovery: IEA

The establishment of the European Green Deal and the introduction of national policies to curb greenhouse gas (GHG) emissions from the transport sector has laid the groundwork for the downturn in oil products demand in Europe, Joel Couse, special advisor of the IEA's Directorate of Energy Markets and Security said.

Speaking on a panel at the Argus Crude Live virtual conference, he stressed that demand for oil products in Europe was already in decline in 2019 before the pandemic caused a slump in consumption, and that it is "not expected to ever return to its level of 2019". While Couse expects to see a progressive recovery this year, demand for refined oil products in 2025 will still fall 200,000 b/d short of levels recorded in 2019.

Jet fuel was the most heavily affected product in the region and continues to prevent a gradual recovery in overall oil products demand, while road fuels have proved more resilient. But Couse stressed that the transition to more sustainable modes of transport as a result of the European Green Deal and national climate policies was accelerated by the Covid-19 pandemic, with road fuels expected to lose share to electric vehicles in the near term. The post-pandemic recovery in aviation fuel demand is expected to be slow, pushed back further by the sector's drive to introduce more fuel-efficient aircraft in the long term.

"In this context, the regional demand for refined oil products looks weak," Couse emphasised.

European oil products demand is likely to peak again in 2024, albeit at lower levels than it previous high in 2017, with the recovery in jet fuel demand and the rising interest in naphtha offsetting some of the losses incurred by gasoline and diesel. But rising demand for petrochemical feedstock, speciality products as well as biofuels, is likely to be the lifeline for refiners in the region, who need to adapt to the new environment as Europe is slowly moving away from conventional transportation fuels, Couse said.

By Florence Schmit