China’s Navy Catching Up

Over the last several years we have written about the growing imbalance between U.S. and Chinese dependence on the Persian Gulf for oil. Chinese oil demand growth and U.S. oil supply growth have shifted the importance of the region for both importers. A significant and lengthy disruption in the Persian Gulf could still impact all oil consumers through the price mechanism, but the U.S. economy is now far more insulated from energy disruptions than the Chinese economy. Not surprisingly, China’s naval capabilities have grown considerably to address this vulnerability to the flow of oil and other goods

Oil Product Demand Growth Outpaces Supply

Asian oil demand growth of 700,000 b/d will outpace regional throughput growth of 300,000 b/d in 2019. Refiners will reduce utilization rates in the first half of 2019 in response to weaker margins and the strong growth of Middle East supplies. Throughput restraint in the first half of the year will lay the groundwork for stronger refining margins in the second half of the year, particularly from middle distillates.

Iran’s Loss, Russia’s Gain

Hellenic Shipping News:

Russia will export more crude beginning in September, with most incremental exports targeting Europe, according to ESAI Energy’s CIS Watch Crude Outlook. Russia’s higher exports will come just as European refiners cut imports of Iranian crude, turning Iran’s loss into Russia’s gain.

Strategic Stockpiling to Support Crude Imports

China’s strategic petroleum reserve (SPR) depot in Jinzhou officially started filling in August, bringing the existing depot capacity to a total of 249.1 million barrels. The 31.4-million-barrel Zhanjiang depot will not be commissioned until perhaps the second half of 2019. We estimate that crude stocking in depots will add 70,000 b/d to Chinese crude demand between August and the end of 2018 and another 150,000 b/d in 2019.

Russia, Australia to boost global LPG supply

Kallanish Energy:

Russia and Australia are expected to add over 100,000 barrels per day of new liquefied petroleum gas (LPG) supply in coming months, providing markets with an alternative supply source, Kallanish Energy learns.

Consulting firm ESAI Energy said Thursday in its latest Global NGL Outlook the non-U.S. projects will boost global LPG supply while restraints in U.S. exports infrastructure limit shipments this winter.

Refineries Boost Gasoline, Diesel Output

Saudi Arabia’s new 400,000 b/d refinery and Iran’s 120,000 b/d condensate splitter will highlight the region’s refining capacity gains in 2019. New or repaired secondary units in Kuwait and the UAE will also boost transportation fuel output next year. This will translate to lower gasoline imports and higher diesel exports from the Middle East next year, adding pressure on both fuels’ spreads to crude globally

Iran’s Crude Buyers Explore their Options

Hellenic Shipping News:

An excess of global refining capacity looms after 2021, according to ESAI Energy’s newly released, Global Refining Capacity Five Year Outlook. ESAI Energy projects a significant increase in new distillation capacity to 2023. After lagging demand growth in recent years, the coming capacity build cycle will significantly outpace demand. The resulting rise in spare capacity will reduce global utilization rates and put pressure on margins, particularly beyond 2021.

Capacity Glut to Trigger Refinery Closures after 2021

Hellenic Shipping News:

An excess of global refining capacity looms after 2021, according to ESAI Energy’s newly released, Global Refining Capacity Five Year Outlook. ESAI Energy projects a significant increase in new distillation capacity to 2023. After lagging demand growth in recent years, the coming capacity build cycle will significantly outpace demand. The resulting rise in spare capacity will reduce global utilization rates and put pressure on margins, particularly beyond 2021.