(Bloomberg) -- The surge in crude prices to the brink of $50 a barrel isn't being celebrated in every corner of the oil market: weak fuel demand in Europe means the continent's beleaguered refineries are struggling to pass on the higher cost to buyers.
Road-fuel usage in some of Europe's biggest economies has slowly crept higher in recent weeks, but it's still down by about a third compared with pre-pandemic levels, high-frequency data compiled by Bloomberg show. The consequent demand loss is a blow for the continent's refineries because surging consumption elsewhere -- in particular Asia -- is driving up the cost of crude.
Brent traded as high as $49.92 a barrel on Friday, up roughly 40% since the start of November, according to ICE Futures Europe. Worse still for Europe's refineries, the differentials for physical cargoes have also been rallying, further boosting the prices they pay for crude.
The bottom line for refineries is that turning Forties and Urals crude oil into fuels in northwest Europe and the Mediterranean is loss-making across almost every main processing configuration, according to Oil Analytics Ltd., which tracks margins across the industry. Hydrocracking, which typically yields large amounts of diesel, is the only process that's making money.
©2020 Bloomberg L.P.
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