Thursday 21 Nov
A rare occurrence for a fuel that powers large swaths of the global economy, global demand for diesel is expected to decline this year.
The Paris-based International Energy Agency (IEA) The International Energy Agency (IEA) has downgraded its global diesel demand forecast for the year, predicting a decline of 258,000 barrels per day. This is the largest annual decline since 2016, outside of the COVID-19 pandemic.
While this may seem small
compared to total global consumption, it's a significant development. Diesel
fuels a vast array of sectors, from transportation to agriculture, making it a
key indicator of economic health.
Vikas Dwivedi, Global Energy
Strategist at Macquarie Group, has declared the end of diesel's era as a
primary driver of oil demand growth. Although demand is projected to rise next
year, it will be outpaced by supply increases, resulting in a substantial
inventory buildup.
Chinese diesel demand is facing
headwinds from a slowdown in construction and housing activity, as well as the
rapid adoption of natural gas-powered trucks. In India, diesel sales have grown
at a sluggish 1.8% year-to-date, the slowest pace since the pandemic-induced
lockdowns of 2020.
US diesel inventories have
reached their highest seasonal levels in two years, indicating a significant
surplus. Futures contracts have entered a contango state, a clear sign of
oversupply. In Northwest Europe, diesel inventories are expected to remain
above seasonal norms. Moreover, investor sentiment has shifted from bullish to
bearish, with asset managers taking net short positions on diesel futures.
It's worth noting that there are
various types of diesel, each used in a different sector. For example, marine
gasoil is used to power ships, while land vehicles typically consume ultra-low
sulfur diesel, and heating oil is used for heating purposes.
It's important to note that different types of diesel fuel various sectors. Marine gasoil powers ships, ultra-low sulfur diesel fuels vehicles, and heating oil warms homes. Global diesel demand in 2024 has been negatively impacted by weak industrial activity in key regions, notably China, and milder-than-usual winter weather in Europe and Japan.
