Following the collapse of the oil price in late 2014, European seaborne crude imports increased by a robust 6% in 2015, to account for 25% of global seaborne crude imports, bucking the downwards trend of previous years. However, with the oil price having stabilised in 2016 so far, it appears that European crude imports may be returning to old habits again.
Habitual Problems?
Following a decline of 2% in 2014, European seaborne crude imports were resurgent in 2015, rising 6% to 9.5m bpd. In fact, growth in European seaborne crude imports in 2015 accounted for around 50% of total expansion in global seaborne crude imports. This rapid increase was stimulated by the fall in the oil price, which supported refinery margins and drove OECD European refinery throughput up 6% in 2015. Meanwhile, the low oil price and high production levels supported crude stocks in the region expanding by 50m bbls, to stand at 361m bbls at the end of the year, the highest level since mid-1998.
Turning A Corner
However, whilst there was firm growth in European crude imports in 2015, this has not been the case so far this year. In the first eight months of 2016, seaborne crude imports into the featured European countries (which accounted for 90% of European seaborne crude imports in 2015) have fallen by 2% y-o-y to 8.3m bpd. This is partially as a result of more limited crude inventory building so far in 2016, with stocks at the end of August standing at around the same level as at end 2015.
Meanwhile, refinery throughput in Europe has also come under pressure so far in 2016, due to weakening margins, strikes in France earlier in the year and the recent closure of 0.1m bpd of refinery capacity in the UK. OECD European refinery throughput has reportedly fallen by 2% or 0.2m bpd y-o-y in the first seven months of 2016 to stand at 11.8m bpd.
Where Did That Come From?
Whilst total European crude imports have fallen in 2016, the story is more varied at a trade lane level. In 2015, European import growth was largely driven by greater shipments from the Middle East (MEG), West Africa (WAF) and from elsewhere in Europe. However, in 2016 trade on some routes, including from the Mediterranean and WAF has fallen, with the 19% slump in WAF-Europe crude trade largely a result of issues in Nigeria. However, imports of MEG crude by the featured countries rose 17% y-o-y in January-August to 1.5m bpd, supported by the removal of sanctions on Iran, whilst volumes on some intra-regional routes have also risen. As a result, the impact on vessel demand on a trade lane basis has been mixed, although overall European tonne-mile imports have still declined.
So, it seems that Europe has returned to its old ways, with seaborne crude imports projected to fall 1% this year and 2% in 2017, due to expected refinery closures, likely stock drawdowns from current high levels, and the stabilised oil price. As a result, whilst trade on some routes into Europe may grow, it is unlikely that, at least for now, European crude imports will continue their 2015 role as a key driver of global seaborne crude trade growth.
Source: Clarksons