Europe's oil demand continues to shrivel in 2013

Fri Jul 26, 2013 4:48pm IST

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* German demand rises as economy gathers momentum

* France, Italy and Spain all see sharp demand declines

* Consumption expected to contract in 2013 by 1.7 percent-IEA

By Ron Bousso

LONDON, July 26 (Reuters) - European oil demand fell further in the first half of 2013 despite glimmers of economic recovery, as modest German growth could not offset steep consumption declines in France, Italy and Spain, according to data compiled by Reuters.

Unusually cold weather in April and May in large swathes of Europe boosted demand for heating fuels, but not enough to change what is seen as a grim reflection of the region's economic troubles, traders and analysts said.

"With Europe there are no surprises, we haven't seen any improvement in the first half of the year, we are a long way from recovery," said Andrey Kryuchenkov, analyst at VTB Capital.

"Nothing much is happening in terms of growth. Industrial growth has been painfully slow."

The euro zone economy has in recent months shown cautious signs it was crawling out of its record-long recession, but new strains in the region's debt crisis may put all that at risk.

The International Monetary Fund predicted the euro area would remain in recession this year, with the currency bloc's economy contracting 0.6 percent, before recovering slightly to expand just under 1 percent next year.

The International Energy Agency forecast Europe's annual demand to contract by 1.7 percent to 13.5 million barrels per day (bpd) in 2013, after slumping 3.9 percent in 2012.

In Italy, which has seen consumer morale rise recently as it struggles with its longest post-war recession, demand for refined oil products in the first six months of 2013 decreased by 8 percent, industry group Unione Petrolifera (UP) said.

Europe's second largest economy, France saw diesel and gasoline consumption slip 1.8 percent from 2012, according to the industry group Union Francaise des Industries Petrolieres (UFIP).

Spain's January-May total oil consumption was down 5.9 percent from a year earlier, according to government data.

GERMAN SUPPORT

Germany, Europe's largest economy that appears to be gaining growth momentum, was the only major euro zone economy to see consumption growth.

German oil product sales rose 2.9 percent between January and May from a year earlier to 45 million tonnes, according to state economic and trade statistics office BAFA.

"Unseasonably cold late winter weather was likely a major driver behind the rebound, though there are early signs that the beleaguered German economy may be on the mend," the IEA said in its July monthly report.

Total oil and oil product demand in Britain nevertheless drifted 0.1 percent lower between January and May compared with a year earlier, according to the Department of Energy and Climate Change.

At the same time as European motor fuel consumption continued its recent years' decline, car sales slumped to their lowest six-months total in 20 years in the first half of 2013.

A 6.3 percent drop in June vehicle sales suggested no let up for an industry battered by over capacity and weak demand.

The transport sector accounts for 55 percent of Europe's oil demand.

Looking forward, European oil product demand is expected to grow by a meagre 0.1 percent per year by 2015, according to the UK Petroleum Industry Association (UKPIA).

"Changes in demand are likely to be relatively modest over the next few years, but over the long term, growth rates are expected to pick up slightly, with the highest rates expected to be in Southern Europe as this region has the greatest number of growing economies," UKPIA said in a recent report.

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