US LPG Exports Set to Climb

Oil and Gas Journal: Renewed LPG demand growth in India and China will lead to growth of US exports later this year, according to ESAI Energy’s newly published Global NGL Outlook. Since exports have bumped up against capacity constraints, the timely completion of new LPG export terminals in the US and Canada will be vital to this export growth. Stronger demand has implications for propane and butane prices, whose discounts to naphtha have widened considerably.

Stumbling into Military Conflict

Hellenic Shipping News: The Joint Ministerial Monitoring Committee (JMMC) of OPEC met to assess the oil market and the impact of the OPEC+ production restraint. The committee commended the “agile and flexible approach” of the OPEC+ countries, but made no specific recommendations beyond continuing to monitor the oil market until the next meeting in June. That JMMC meeting will take place just before the full Ministerial meeting at which the member states will decide whether to continue the current production restraint. The JMMC communique pointed out “critical uncertainties” such as trade negotiations, monetary policy and geopolitical challenges. Among those geopolitical challenges are rising tensions between Iran and the U.S. since the non-renewal of sanctions waivers early this month. The possibility that the two countries could stumble into direct military conflict is rising.

North Sea Production Declines Finally End in 2020

In 2019, North Sea crude and condensate output will fall for the third consecutive year, by roughly 70,000 b/d to an average of 2.5 million b/d as declines in Norway continue to outpace gains in the U.K. However, in 2020, North Sea output will rise by 200,000 b/d to more than 2.7 million b/d due primarily to the ramp-up of production at the Johan Sverdrup project.

Resid Hydrocracking Expands Quickly

As IMO specification changes approach quickly, ESAI Energy takes another look fuel oil upgrading projects through 2020. Current investments are not enough to eliminate a large surplus of heavy fuel oil components by 2020. Identifying fuel oil upgrading investments by type is critical to understanding the quality and quantity of fuel oil that will be both consumed in bunker markets and in surplus.

Market Alert: Russia Finally Restores Druzhba Exports

Four weeks after the contamination of Russian oil disrupted the flow of 1.3 million b/d of crude to Belarus and via the Druzhba pipeline to Europe, it appears Russia is fully restoring those pipeline deliveries. To compensate for the loss of as much as 1 million b/d of overland crude deliveries, Russia managed only a small net increase in seaborne exports. This disruption to production, exports and revenues may have strengthened Russian resistance to an extension of the OPEC+ deal.

Feedstock Prices are Falling Like Dominoes

Crude may be at a six-month high this month, but feedstock prices are falling like dominoes. As naphtha lost ground on crude, Far East spot propane and butane prices traded at wider discounts to naphtha. Back at Mt Belvieu, a temporary de-linking of propane and butane from the international market caused those prices to fall even more than international benchmarks. For some product markets, the 12-month outlook is anything but “more of the same.” Among other things, new LPG export terminals and higher demand growth will be supportive of U.S. LPG exports and Mt Belvieu pricing.

Stumbling into Military Conflict

Yesterday, the Joint Ministerial Monitoring Committee (JMMC) of OPEC met to assess the oil market and the impact of the OPEC+ production restraint. The committee commended the “agile and flexible approach” of the OPEC+ countries, but made no specific recommendations beyond continuing to monitor the oil market until the next meeting in June. That JMMC meeting will take place just before the full Ministerial meeting at which the member states will decide whether to continue the current production restraint. The JMMC communique pointed out “critical uncertainties” such as trade negotiations, monetary policy and geopolitical challenges. Among those geopolitical challenges are rising tensions between Iran and the U.S. since the non-renewal of sanctions waivers early this month. The possibility that the two countries could stumble into direct military conflict is rising.

Jet Sustains Transport Fuel Demand Growth in 2019

After growing by an annual average of 60,000 b/d over the last five years, European jet fuel demand is expected to rise by a similar amount this year, as the region’s air traffic continues to grow steadily. However, jet fuel will represent the lone bright spot in the broader European transport fuel market, as non-jet fuel consumption growth slows to 40,000 b/d this year from 100,000 and 195,000 b/d in 2018 and 2017, respectively.