Global diesel demand crumbling, warns IEA

LONDON (Reuters) - European demand for diesel is expected to have fallen in the first three months of 2016 for the first quarterly decline in nearly two years, the International Energy Agency reported on Thursday, the latest sign of distress in the fuel market.

Europe, where roughly half of cars are fuelled by diesel, joins the United States, China and Japan which saw demand contract for a second consecutive quarter in January-March, according to the IEA.

"Global gasoil demand crumbles," the Western energy watchdog said in its benchmark monthly report. Gasoil includes several different grades of fuel but diesel is the most important.

"The end of gasoil demand growth is not yet upon us, as modest gains are forecast towards the end of the year as the underlying industrial situation improves worldwide," particularly in the United States and India, it said.

Chinese demand for diesel slowed in recent years as the world's second-biggest economy shifted away from heavy manufacturing to be more consumer-focused. In the United States and Japan the weakening demand was linked to slower manufacturing and industrial activity and a mild winter in North America.

Prior to 2016, "the European gasoil consumer demonstrated stolid resistance, a resolve that cracked in Q1 2016," when demand declined by 75,000 barrels per day compared to a year earlier, it said.

The declines were led by France and Germany, which saw diesel consumption drop by 50,000 and 20,000 bpd respectively from a year earlier.

The IEA trimmed slightly its forecast for growth in global oil demand this year to 1.2 million bpd, for total annual demand of 95.9 million bpd.

(Reporting by Ron Bousso; Editing by Susan Fenton)