E15 Will Have Limited Near-Term Impact

The E.P.A. will begin the process of allowing sales of E-15 gasoline year-round. Although the waiver will increase ethanol more significantly in the long term, short term demand impacts will be limited by investment requirements and consumer preferences. As a result, ESAI Energy forecasts a high of just 60,000 b/d of additional E-15 sales by 2020, or just 10,000 b/d of additional ethanol blending.

Product Export Quotas Suggest Lower Gasoline and Diesel Exports

China’s September crude imports remained unchanged from August at 9 million b/d. In the fourth quarter, ESAI Energy estimates that China’s throughput could boost crude imports by at least 150,000 b/d, based on analysis of refining capacity increases, maintenance, and seasonal utilization. Meanwhile, China’s new product export quotas suggest that gasoline and diesel exports between September and December would both fall by 60,000 b/d, compared to January-August levels.

China Mega-Refineries Barely Impact Diesel Supply

Hellenic Shipping News Worldwide:

China will add 900 000 bpd of crude distillation capacity between late 2018 and early 2019, but China’s overall production of transport fuels will grow less than one might think, according to ESAI Energy’s newly released China Watch. Most notably, ESAI Energy projects China’s overall diesel production could grow by 50 000 bpd or less in 2019. The growth of China’s supply of middle distillate and overall transport fuel output has implications for Asian product markets and China’s least sophisticated independent refineries struggling to remain viable in the domestic market.

China Mega-Refineries Barely Impact Diesel Supply

Hydrocarbon Engineering:

China will add 900 000 bpd of crude distillation capacity between late 2018 and early 2019, but China’s overall production of transport fuels will grow less than one might think, according to ESAI Energy’s newly released China Watch. Most notably, ESAI Energy projects China’s overall diesel production could grow by 50 000 bpd or less in 2019. The growth of China’s supply of middle distillate and overall transport fuel output has implications for Asian product markets and China’s least sophisticated independent refineries struggling to remain viable in the domestic market.

U.S. Unlikely to Take Significant Action Against Saudi Arabia

The presumed execution of Saudi Journalist Jamal Khashoggi at the Saudi consulate in Turkey has seriously rattled U.S.- Saudi relations and led to the discussion of sanctions in the U.S. Congress. Even so, the complex relationship between the two countries, and especially the joint effort to contain and weaken Iran, tilt against a significant economic response from the Trump Administration.

Asia’s Fuel Subsidies Not Enough to Support Oil Demand Growth

Hydrocarbon Engineering:

Fuel price increases will outpace Asian governments’ ability to offset them with subsidies, according to ESAI Energy’s recently published Asia Watch. India, Malaysia, and the Philippines have already boosted subsidies for gasoline and diesel and Indonesia could soon follow, with national elections coming in 2019. But weakening local currencies are exacerbating the effects of rising oil prices for consumers in many Asian countries. At the same time, trade tensions between China and the US are eroding regional business confidence and threaten to drag on Asian economic growth next year.

E-15 Impact Limited Near-Term

The E.P.A. will begin the process of allowing sales of E-15 gasoline year-round. Although the waiver will increase ethanol more significantly in the long term, short term demand impacts will be limited by investment requirements and consumer preferences. As a result, ESAI Energy forecasts a high of just 60,000 b/d of additional E-15 sales by 2020, or just 10,000 b/d of additional ethanol blending.

Modest Middle Distillate Growth Despite Mega Refining Projects

From the end of 2018 to early 2019, three refining projects will start operations, adding total crude distillation capacity of 900,000 b/d. ESAI Energy estimates that the resulting increase in refined product output in 2019 will be 140,000 b/d for gasoline, 30,000 b/d for diesel, and 80,000 b/d for jet. This relatively modest growth is due to the petrochemical focus of the new projects as well as lower utilization rates of some other refiners facing tough competition.

Weak Currencies, Trade Tensions to Dent Demand Growth

Increasing subsidies will not fully offset higher fuel prices in most Asian countries in 2019, and weaker currencies and slower economic growth will not help. Transportation fuel demand growth outside of China will decelerate to 300,000 b/d in 2019, after growing by 340,000 b/d in 2018. In China, demand will return to modest growth next year after collapsing in 2018.

Oil Edges Lower in Wednesday Trade

DTN:

Oil futures on the New York Mercantile Exchange nearest to delivery and the front month Brent contract on the Intercontinental Exchange edged lower from Tuesday’s shallowly mixed session ahead of weekly supply data for the United States to be released midmorning, and following bullish statistics released late Tuesday afternoon by the American Petroleum Institute.