August is typically a peak time for refining. Not this year.
European refiners will cut output in August compared with the previous three months as they expect a fall in demand for transport fuels as the northern Hemisphere summer holidays draw to an end, a Reuters survey showed.
This is I suppose good news for the sector, as a cut in runs will stop margins getting even worse. However it is a good indicator of how difficult things are right now.
The big problem is middle distillates.
Globally, industrial demand has fallen very sharply, but not as much as in Europe, where the overhang of middle distillates, key for European refiners, will keep their profit margins thin.
The problem is compounded by the fact that both diesel and jet fuel demand are down sharply. According to the IATA, European airline passenger numbers are down 7.6% for the first half, and flights down 4.8%.
Similar numbers for road transportation seem to be unavailable, but The European Union Road Federation claims that in some markets, there was a decline as high as 50% in the last quarter of 2008.
Once again we can see that the refining sector is forced to simply adapt as best it can and wait for the economic recovery.