Brazilians will opt for pure ethanol over gasoline again next year when they fill up at the pump. This year’s huge demand swing toward E100 will not repeat itself, but ethanol-favoring fundamentals will persist, preventing a gasoline recovery.
The Chinese gasoline surplus will grow in 2019, while the diesel surplus will stay flat, driven by the new refining capacity & a mild demand recovery, putting pressure on Singapore margins.
The global LPG market will struggle to absorb supply in the next two years, according to ESAI Energy’s newly published Global LPG Two-Year Outlook.
After years of growth, Europe’s distillate deficit is slated to remain flat next year. As a result, Europe’s distillate imports will also remain steady. However, steady trade volumes belie a shift in flows, with the Middle East continuing to gain market share at the expense of Asia and North America.
With President Trump actively interested in U.S and Iranian production, President Putin in Russian production, and Crown Prince Mohammad Bin Salman (acting on behalf of his father King Salman) in Saudi production, these three leaders are shaping over 40 percent of global crude oil supply. Oil prices should remain soft unless or until there is a new supply disruption or the OPEC producers, who have recently cranked up production, dial back. Alternatively, fewer waivers may be granted in 6 months or Russia might cutback output growth. There is a broad range of possible outcomes, even as all parties claim diplomatic collaboration. This much head of state interest in crude oil markets will muddy the waters for supply and prices in the months ahead.
As the Asia-Pacific gasoline surplus grows, the middle distillate surplus will tighten, squeezing gasoline spreads to crude in Singapore, while a tighter distillate balance supports diesel spreads with China as the major factor in both movements
Kazakhstan has achieved gasoline self-sufficiency, which combined with other regional developments push more Russian and Belarusian gasoline into the Atlantic basin and have a bearish impact on gasoline markets.
Russian production growth has led to higher crude exports. Lately, export growth has been in pipeline deliveries to China, but growth will shift to seaborne outflows from Europe.
U.S. sanctions on Iran’s exports of crude oil and condensate came into effect today, with waivers granted to eight of Iran’s traditional customers in Asia and the Mediterranean. It seems the waivers may be a useful negotiating tool for the Trump Administration and, thus, although they expire in 6 months, it is likely they will be extended. Even with these waivers, Iranian exports will still fall by roughly 1.2 million b/d in 2019.
Calls for a cease-fire in Yemen reflect the complicated relationship between the U.S. and Saudi Arabia, which, at least outwardly, took a turn for the worse following the execution of Jamal Khashoggi. Still, opposition to Iran will continue to trump all other issues between these two countries. This does not bode well for Yemen.
In its recent ‘2-Year Global Crude Oil outlook’, ESAI Energy asserts that the global oil supply/demand fundamentals will be generally balanced in 2019, but product market weakness will build in, late in 2020.
While global oil supply and demand fundamentals will be generally balanced in 2019, product market weakness will build in late 2020, according to ESAI Energy