Viewpoint: European diesel to stay under pressure

: Oil products
24/12/30

The European diesel market appears to be in a period of transition defined by economic headwinds, a decline in structural demand and anticipated refinery closures in the new year.

These factors are exerting downward pressure on diesel refining margins, with the IEA forecasting no return to the high margin environment experienced immediately after the Covid-19 pandemic. Margins in Europe have been trending downwards in 2024 to below $17/bl, lower by a third from $28.53/bl in 2023 and less than half the heady levels of $37.27/bl in 2022.

The economic rebound experienced in the immediate aftermath of the pandemic bequeathed a high inflationary environment, and this became a significant headwind in Europe going into 2024. Central banks tightened monetary policy to counteract this, dampening economic activity and as a consequence demand for diesel, the primary fuel grade powering transport fleets, construction equipment and manufacturing.

European demand has been notably lacklustre. The largest economies in the region, Germany and France, saw diesel consumption decline by 4pc and 3pc respectively in 2024, according to the most recent published data. The former's loss of cheap Russian gas has undermined its economic model, which appears to have had a structural effect on national diesel demand.

Any improvement in European economic fortunes in 2025 will likely provide a tailwind for outright diesel values.

Driving issues

Europe is also experiencing a systemic decline in diesel vehicle usage as electric and hybrid vehicles take up an ever increasing share.

Newly-registered diesel passenger vehicles made up 14.9pc of the German market and 6.1pc of the UK market in November, according to SMMT and KBA data, compared with 31.6pc and 45.8pc for pure gasoline vehicles. New hybrid vehicles claimed a 38.7pc market share in Germany. Delays to outright national bans on new diesel or gasoline vehicle sales may stem the decline in popularity for diesel vehicles, but the trend is unlikely to be reversed.

European refinery closures could serve to rebalance the market next year. Petroineos' 150,000 b/d Grangemouth refinery in Scotland will become an import terminal. In Germany, Shell will cease crude processing at its 147,000 b/d Wesseling refinery and BP plans to permanently shut down a crude unit and a middle distillate desulphurisation unit at its 257,000 b/d Gelsenkirchen plant.

The degree to which these capacity losses are baked into market pricing is debatable, as the refiners could decide to delay closures in the event that diesel margins recover. But the limited effect of recent unscheduled refinery outages in the Mediterranean region illustrates how Europe can bear to lose two crude units, at least in the short term.

In 2025, European diesel prices may again take direction from developments outside the region, particularly the profitability of key arbitrage routes from the US Gulf coast, the Mideast Gulf and India. European diesel values and margins were affected by refinery turnarounds in supplier regions in 2024.

Prices may come under further pressure in 2025 from the start of 10ppm diesel production this month at Nigeria's 650,000 b/d Dangote refinery, which could completely offset the loss in European refining capacity. Any easing in Yemen-based Houthi militant aggression in the Red Sea may encourage diesel cargoes back through the Suez Canal, cutting down delivery times and weighing on supply volatility. Price-supportive developments may come from the EU tightening sanctions on Russia's 'dark fleet', which could weigh on global supply, and an upcoming US refinery maintenance season that is is touted to be disruptive. Two US refineries will close in 2025.

By George Maher-Bonnett

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25/03/28

UK EAC to explore airport expansion, net zero conflict

London, 28 March (Argus) — UK parliament's cross-party environmental audit committee (EAC) has begun an inquiry into whether the country's airport capacity expansion could be achieved in line with its climate and environment targets. "The aviation sector is a major contributor to the UK's carbon emissions, and on the face of it, any expansion in the sector will make net zero even more elusive," EAC chair Toby Perkins said. Any expansions must meet strict climate and environment commitments, the UK government has said. The government in January expressed support for a third runway at London's Heathrow airport — the country's largest. UK transport minister Heidi Alexander said in February that she was "minded to approve" an expansion at London's Gatwick airport, ahead of a final decision in October. The expansion would involve Gatwick making its northern runway operational. It is currently only used as a back-up option. The government is also "contemplating decisions on airport expansion projects at London Luton… and on the reopening of Doncaster Sheffield," Perkins said. "It is possible — but very difficult — for the airport expansion programme to be consistent with environmental goals," Perkins said. "We look forward to exploring how the government believes this can be achieved." The UK has a legally-binding target of net zero emissions by 2050. Its carbon budgets — a cap on emissions over a certain period — are also legally binding. The government must this year set levels for the UK's seventh carbon budget , which will cover the period 2038-42. The committee has invited written submissions on the possible airport expansions and net zero, with a deadline of 24 April. It will report in the autumn. By Georgia Gratton Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Oil, biofuel groups meet to align on RFS policy

25/03/27

Oil, biofuel groups meet to align on RFS policy

New York, 27 March (Argus) — Energy and farm groups met last week at the American Petroleum Institute to negotiate a joint request for President Donald Trump's administration as it develops new biofuel blend mandates, according to five people familiar with the matter. The private meeting involved groups from across the supply chain, including representatives of feedstock suppliers, biofuel producers, fuel marketers, and oil refiners with Renewable Fuel Standard (RFS) obligations. The groups coordinated earlier this year around a letter to the Trump administration on the need to update the RFS and are now seeking agreement on other program elements. According to the people familiar with the matter, the groups agree on pushing the Environmental Protection Agency (EPA) to set higher blend mandates under the program's D4 biomass-based diesel and D5 advanced biofuel categories. 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Repsol to begin Nantes bitumen terminal flows in April

25/03/27

Repsol to begin Nantes bitumen terminal flows in April

London, 27 March (Argus) — Spanish integrated Repsol plans to supply next week its first bitumen cargo to the Nantes import terminal on the French Atlantic coast. It will move a second cargo to the terminal during April. The start of these flows will coincide with the scheduled restart of the 50/50 Repsol/Moeve joint venture 1.2mn t/yr Asesa bitumen refinery. The refinery has been down since early March for planned maintenance work. The Nantes oil products terminal, including the bitumen storage facility there, has been operated by Dutch liquid bulk storage firm Chane since summer 2024, after a rebrand from its previous name Alkion Terminals. Shell ceased its bitumen cargo throughput deal into and truck supply operation from Nantes and Bayonne at the end of 2024. Repsol and Abu Dhabi-controlled Spanish energy company Moeve then struck exclusive deals to supply bitumen cargoes to Nantes and Bayonne respectively. Cepsa began exclusively using the Bayonne bitumen terminal from 1 February. Repsol has been increasingly active in bitumen export markets over the past year or so, underlined by rising cargo flows from its 135,000 b/d La Coruna and 220,000 b/d Bilbao refineries on the Spanish Atlantic coast. The Nantes terminal has three 4,000t storage tanks. One of the tanks is undergoing work and will be available for use from June. By Fenella Rhodes Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

UK GHG emissions fell by 4pc in 2024

25/03/27

UK GHG emissions fell by 4pc in 2024

London, 27 March (Argus) — The UK's greenhouse gas (GHG) emissions fell by 4pc year-on-year in 2024, provisional data released by the government today show, driven principally by lower gas and coal use in the power and industry sectors. GHG emissions in the UK totalled 371mn t of CO2 equivalent (CO2e) last year, the data show, representing a fall of 54pc compared with 1990 levels. The UK has legally-binding targets to cut its GHG emissions by 68pc by 2030 and 81pc by 2035 against 1990 levels, and to reach net zero emissions by 2050. The electricity sector posted the largest proportional year-on-year fall of 15pc, standing 82pc below 1990 levels at 37.5mn t CO2e. The decline was largely a result of record-high net imports and a 7pc increase in renewable output reducing the call on coal and gas-fired generation, as well as the closure of the country's last coal power plant in September , which together outweighed a marginal rise in overall electricity demand, the government said. Industry posted the next largest emissions decline of 9pc, falling to 48.3mn t CO2e, or 69pc below 1990 levels, as a result of lower coal use across sectors and the closure of iron and steel blast furnaces. Fuel supply emissions fell by 6pc to 28.4mn t CO2e, 63pc below where they stood in 1990. And emissions in the UK's highest-emitting sector, domestic transport, fell by 2pc to 110.1mn t CO2e, 15pc below 1990 levels, as road vehicle diesel use declined. Emissions in the remaining sectors, including agriculture, waste and land use, land use change and forestry (LULUCF), edged down collectively by 1pc to 67.2mn t CO2e, some 50pc below 1990 levels. Only emissions from buildings and product uses increased on the year, rising by 2pc as gas use increased, but still standing 27pc below 1990 levels at 79.8mn t CO2e. UK-based international aviation emissions, which are not included in the overall UK GHG figures, rose by 9pc last year to reach pre-Covid 19 pandemic levels of 26.1mn t CO2e, the data show. But UK-based international shipping emissions edged down by 1pc to 6.2mn t CO2e. By Victoria Hatherick Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Virgin, Qatar airlines partner on Australia SAF project

25/03/27

Virgin, Qatar airlines partner on Australia SAF project

Singapore, 27 March (Argus) — Privately-held airline Virgin Australia and state-owned carrier Qatar Airways will partner with bioenergy firm Renewable Developments Australia (RDA) on a sustainable aviation fuel (SAF) project near the city of Charters Towers in northern Queensland state. The project seeks to build an alcohol-to-jet (AtJ) facility with a nameplate capacity of 96mn litres/yr of SAF to be supplied to nearby airports, most likely to terminals at Townsville and Cairns city. The refinery is in the pre-final investment decision stage and is aiming to reach first output in early 2029, according to RDA. "Our SAF facility will be a fully integrated production site, generating sustainable fuel from bioethanol derived from locally grown sugarcane," RDA managing director Tony D'Alessandro said on 27 March. SAF by-products will be used to generate renewable power on-site and increase sustainability credentials, RDA said. Qatar last year agreed to buy a 25pc stake in Virgin , Australia's second-largest airline, with plans to increase international flights to Australia using Qatar planes wet leased by Virgin approved last month. The development comes after Virgin last week agreed to a deal with Australian refiner Viva Energy to operate services from the town of Proserpine in north Queensland using a SAF blend for several months this year . North Queensland's sugar industry has attracted interest from other developers of AtJ plants, including Australian bioenergy developer Jet Zero's 113mn l/yr Project Ulysses at Townsville, which has attracted funding from investors including Australian carrier Qantas, Airbus and Japanese energy conglomerate Idemitsu Kosan. By Tom Major Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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