If the oil market offers clues about the state of the economy, it’s through the prism of two petroleum products: diesel and naphtha. And in Europe, the news is bleak.
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(Bloomberg) — If the oil market offers clues about the state of the economy, it’s through the prism of two petroleum products: diesel and naphtha. And in Europe, the news is bleak.
The former powers trucks, trains, ships and industries including farming and construction. The latter is used by the petrochemical sector to make everything from medical equipment to chewing gum. OECD Europe’s annual consumption of both is set to plunge this year, with naphtha hitting its lowest since 1975.
The continent’s demand is still critically important even in a world where traders are intently focused on the potential for supply disruptions emanating from war in the Middle East. The expected consumption drop in the two fuel types this year is well over half a million barrels-a-day versus pre-pandemic levels — not far off a Belgium’s worth of overall oil usage.
As a major importer of diesel-type fuel from the Middle East, India and the US, and a regular exporter of naphtha to East Asia and Latin America, any significant drop in Europe’s usage is likely to have knock-on effects for economies and oil markets around the world.
Part of this year’s demand decline is due to long-term, structural trends. Buyers in the European Union have long been favoring gasoline-powered options over diesel, and electric car sales have also hit consumption.
The numbers on naphtha are stark: consumption is set to fall more than a quarter this year versus 2021 to 844,000 barrels-a-day, the lowest it’s been in 48 years, according to Ciaran Healy, an oil market analyst at the International Energy Agency. While naphtha is also used in blending to make gasoline, the watchdog’s consumption measurement doesn’t include this uptake — instead, the vast majority is for use as a petrochemical feedstock.
Run rates at petrochemical steam crackers — huge units that convert naphtha and other feedstock into the industry’s basic chemical building blocks — have plunged, according to data from Argus Media Ltd. Producer OMV AG on Tuesday also dropped its forecast for European steam cracker utilization.
Petrochemical giant BASF SE meanwhile attributed slower European chemical production to “lower demand resulting from high inflation, increased interest rates, and a renewed rise in natural gas prices” on Tuesday.
In the continent’s top five economies — Germany, France, the UK, Italy and Spain — recent data all show contractions in demand for diesel-type fuel.
French road diesel sales fell by 13.4% versus a year earlier in September. In Germany, overall oil demand is expected to drop by about 90,000 barrels-a-day this year, more than any other country in the world — bar Pakistan.
See also: German Oil Demand Drops as Europe’s Industrial Powerhouse Stalls
Overall, OECD Europe’s diesel-type fuel demand is set to be down by about 380,000 barrels-a-day this year versus the 2019 pre-pandemic level, according to the IEA.
Mixed Picture
The global picture is more mixed. In China, demand is booming despite the travails of its property sector: during January-August of this year, diesel-type fuel was up by 40% versus the same period in 2019 and naphtha consumption has more than doubled in the corresponding period, according to JODI data.
China has seen massive investment in petrochemical capacity. A jump in production has pushed many of the industry’s products — such as ethylene, propylene and aromatics into oversupply — even as they’ve boosted the country’s attractiveness as a manufacturing hub, said Amber Liu, Asia head of petrochemical analytics for ICIS.
In the US, implied demand for distillates — which include diesel and heating oil — has fallen below seasonal norms in the past few weeks.
Going forward, the nation’s distillates demand is expected to stay below that of year-ago levels in the fourth quarter before picking up early next year, according to government forecasts.
Still, the trucking industry is showing signs of nascent recovery, and rail freight is rising as well, analysts at JPMorgan said.
Naphtha is typically used to make gasoline in the US while cheaper natural gas liquids — a byproduct of drilling shale oil — have become the preferred feedstock for petrochemicals.
For Europe, “the outlook for 2024 remains weak for both products,” Gelder said.
—With assistance from Rachel Graham.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Press. All rights reserved.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
The Canadian Press. All rights reserved.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
The Canadian Press. All rights reserved.
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