In a BMI report despatched to Rigzone by the Fitch Group not too long ago, analysts at BMI mentioned mainland China’s diesel demand progress is beneath strain from pure gasoline and the electrification of the transport sector.
“We’ve got revised China’s diesel consumption forecast for 2024 to 4.0 million barrels per day, down from the earlier forecast of 4.1 million barrels per day,” the analysts said within the report.
“The downward revisions replicate ongoing weak point in demand from numerous financial sectors and a slower financial progress price,” they added.
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The analysts famous within the report {that a} assessment of diesel demand numbers within the first half of 2024 signifies that diesel consumption fell by 11 p.c 12 months over 12 months to three.9 million barrels per day.
“Weak demand from the manufacturing and development sectors is predicted to persist for the remainder of the 12 months because the nation grapples with lingering actual property sector woes,” the analysts added.
“Diesel demand is additional weighed down by the rising choice for LNG-fueled heavy-duty autos within the transport sector,” they continued.
The BMI analysts said within the report that the Chinese language authorities is making rising efforts to advertise heavy-duty LNG vans as a part of its coverage to scale back emissions from the street transport sector.
“In accordance with trade sources, the sale of LNG vans elevated by greater than 144 p.c 12 months over 12 months to 71,600 items between January and April 2024,” the analysts mentioned.
“Decrease LNG import costs are one of many key drivers behind the rising reputation of LNG-fueled vans within the business sector. Rising LNG provides at low price are partly driving the rising choice for LNG vans, thereby eroding demand for diesel,” they added.
“We undertaking a 4 p.c 12 months over 12 months decline in China’s diesel consumption in 2024,” they warned.
The BMI analysts went on to state within the report that they anticipate that the annual lower in Chinese language diesel demand might common in extra of 150,000 barrels per day between 2024 and 2025.
“We additionally count on China’s diesel demand might peak earlier than the tip of the last decade, in opposition to the backdrop of the accelerating adoption of electrical and LNG-fueled autos in personal, public, and business segments of the street transportation,” they said.
Asia Diesel Provide
Within the report, the BMI analysts famous that Asia’s diesel provide is predicted to stay structurally lengthy as a result of weak point in demand-side fundamentals and a possible improve in provides.
“Diesel provide has been rising, and diesel imports from Indonesia are anticipated to say no additional in 2024 when new provides change into out there because the expanded Balikpapan refinery commences manufacturing in Might 2024,” they mentioned.
“India’s diesel surplus will improve additional if refining capability additions are accomplished. Rising competitors for market shares amongst main diesel exporters corresponding to South Korea, China, India, the U.S., and Center Japanese refiners might show to be unfavorable for a stronger diesel value outlook in the long run,” they added.
“Thailand, Singapore, and Malaysia are anticipated to keep up diesel manufacturing at optimum ranges for the remainder of 2024 regardless of current alternatives to export to worldwide markets,” they continued.
The analysts went on to notice within the report {that a} regional provide glut might persist as a result of weakening regional demand and costs.
“Diesel stock ranges in Singapore proceed to rise, supported by elevated inflows from the area,” they mentioned.
“Knowledge from Singapore Worldwide Enterprise signifies that center distillate shares, primarily comprising diesel, remained traditionally excessive since 2021 staying above 10 million barrels within the second week of September 2024,” they added.
“Consequently, common Asian diesel crack spreads have fallen to under $9.7 per barrel within the third week of August from a peak of $34 per barrel in January 2023,” they continued.
“We count on Asian diesel crack spreads to stay beneath downward strain so long as oversupply continues to persist,” they mentioned.
The analysts went on to state that upside dangers to diesel costs might solely be supported by decreasing refinery utilization charges and diesel manufacturing cuts throughout the refining trade.
Indonesia Oil, Diesel Demand
In a separate BMI report despatched to Rigzone by the Fitch Group again in August, BMI analysts mentioned that they had revised down their forecast for Indonesia’s oil demand progress, “contemplating the potential loss in diesel demand as a result of gasoline substitution within the energy and industrial sectors”.
“Indonesia’s long-term gasoline demand progress is predicted to gradual as the federal government seeks to diversify away from fossil fuels,” the analysts said in that report.
“We now undertaking demand progress to common two p.c 12 months on 12 months over the three years to 2026, down from the earlier forecast of three p.c,” they added.
“Refined gasoline consumption in 2024 will stay supported by sustained demand for diesel, gasoline, LPG, and jet gasoline,” they continued.
“Nonetheless, the tempo of gasoline demand progress is predicted to decelerate as the federal government implements measures corresponding to growing pure gasoline provides for the facility trade to advertise power transition and lowering gasoline demand progress by chopping gasoline subsidies,” they went on to state.
The analysts additionally highlighted in that report that the rising use of biofuels within the transport sector will erode demand for refinery diesel, “undermining long-term prospects for gasoline demand progress”.
“We undertaking Indonesia’s whole gasoline consumption to stay comparatively secure at round 1.70 – 1.76 million barrels per day from 2024 to 2026,” the analysts added.
International Diesel Value
In one other BMI report despatched to Rigzone by the Fitch Group again in July, BMI analysts revealed that that they had revised their common world diesel value forecast downward, “reflecting ample supply-side fundamentals”.
“We undertaking the worldwide diesel value for 2024 to common $96 per barrel versus $115 per barrel in our earlier quarterly forecast,” the analysts mentioned in that report.
“We anticipate diesel costs to move decrease in Q3 2024 earlier than selecting up in This fall 2024 when winter units in. Nonetheless, we stay bearish on costs for 2024 since incremental seasonal demand progress won’t be adequate to ease the worldwide provide glut,” they added.
“Our bearish outlook is supported by the continued slowdown on this planet’s largest European diesel market and structural weak point in U.S. diesel consumption. Weakening diesel costs throughout three key buying and selling areas within the first half of 2024 counsel the market stays oversupplied,” they continued.
“There are restricted prospects for a robust restoration in diesel costs in Q3 and This fall 2024 as oversupply will proceed to pull on costs until refiners reply by chopping manufacturing,” they went on to state.
To contact the writer, electronic mail andreas.exarheas@rigzone.com
