China LPG imports to rebound

World Pipelines:
China’s LPG imports will rebound in 2019 after dismal growth of a little over 20 000 bpd in 2018, according to ESAI Energy’s newly published Global LPG Outlook. A new wave of PDH investment will reignite Chinese demand. In a market flush with new supply, exporters will count on an uptick in Chinese demand to stave off a global glut.

New Refining Capacity Weakens Fuel Spreads in Middle East

Diesel and gasoline production in the Middle East will rise next year, as new refining capacity ramps up in Saudi Arabia and Iran, and a damaged unit returns in the UAE. With supply growth of both fuels outpacing demand, the region’s diesel exports will rise and gasoline imports will fall in 2019. This will add bearish pressure to transportation fuel spreads to crude.

Trump Statement Not Oil Policy

Many in the oil patch have pointed to President Trump’s recent statement on Saudi Arabia as a signal to Saudi Crown Prince Mohammad bin Salman (and the world), absolving the prince of guilt for the execution of Jamal Khashoggi and somehow setting up a quid pro quo that requires the Saudis to facilitate President Trump’s perceived preference for low oil prices. That is far too oil-centric an interpretation. President Trump’s statement is for the American people and his own foreign policy team. He wants the focus back on Iran, and knows Saudi Arabia is key to his policies with regard to Iran, not to mention China and Russia. The oil market should resist the temptation of seeing this statement as oil policy. The Saudis still have considerable leeway to pursue their own production policy, notwithstanding President Trump’s oil price tweets.

Latin America Crude: Out with the Heavy, in with the Medium

Latin America’s crude production will increase in 2019. This change will see Latin America’s crude continue to get lighter and sweeter, as Venezuela’s share continues to fall and Brazil’s increases. A lighter, sweeter barrel will be a boon for Brazil once IMO sulfur changes hit but also help support global heavy crude prices relative to light.

Transport Fuel Spreads Weak Until IMO

Despite accelerating demand growth, transportation fuel spreads will remain relatively weak in the first half of 2019. The global gasoline market is forecast to remain oversupplied, and distillate spreads will come under bearish pressure early in the year because of increased supplies from the Middle East and Russia. By the second half of the year, the looming IMO rule-change will start to lift middle distillate spreads.