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.

Market Alert: Heads of State Take Over Oil Markets

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.

Market Alert: Iran Sanctions Waivers

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.