Oilfield Slowdown Seen Sapping US Diesel Demand

A sharp slowdown in oilfield work in the United States will temper demand for diesel as less of the fuel is consumed, the chief economist for a top refiner said on Tuesday.

 

The U.S. onshore industry uses diesel to power drilling rigs, half of which have been idled in recent months because of a 50 percent slide in crude prices.

 

Diesel is also used to generate power to frack wells, and transport supplies such as sand used in fracking to and from oilfields. The fuel is also used to move inland crude by rail to coastal refineries.

 

"We're going to see a challenge for diesel fuel growth this year in the United States," Horace Hobbs, chief economist for Phillips 66, said at the IHS CERAWeek conference in Houston.

 

The outlook for demand growth as a potential price booster was muted.

 

"We do not pin our hopes on demand growth," said Christof Ruhl, Global Head of Research for Abu Dhabi Investment Authority.

 

The U.S. Energy Information Administration forecasts demand for distillates, which includes diesel, will grow by 0.06 million barrels per day this year and to 4.14 million bpd in 2016 from 4.07 million bpd in 2015.

 

Still, diesel demand is expected to accelerate globally because of low prices, said Pierre Siggoney, chief economist for oil major Total SA.