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Demand in Europe is likely to fall slightly in 2017, reaching 13.7m bpd on IEA figures. Refineries (NWE Brent cracking) have managed to benefit from the plunge in prices since June 2014 to improve their margins. However, these have stabilised at around $3/b. For 2016, we expect a decline of 5.7% in European refinery production to 11.6m bpd, given the maintenance undertaken in October. The start to 2017 is also set to see less robust output, continuing on the end-2016 trend, with growth in production of 2% reaching 11.4m bpd. One of the unknowns that could have a positive effect on consumer spending is how harsh the winter is, given high energy consumption during the period. Furthermore, changes in industrial activity in Europe should remain a key factor, since this prompted a 130k bpd plunge in consumption of oil products during summer 2016, and the trend is likely to be the same in Q3 2016, with an equivalent plunge in consumption of diesel, petrol and other fuels.
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