There is Enough Crude Supply

Hydrocarbon Engineering:
In its recently published, Global Crude Oil Outlook, ESAI Energy asserts that there will be enough crude oil supply in 2019 as long as there are no significant new disruptions. Even with the estimated loss of 1.1 million bpd of Iranian exports, more crude production from the US, Brazil, UK, Russia and the Arab Gulf producers can offset other declines and still meet demand for crude-derived petroleum products.

China’s Naval Power Grows

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

Slowing Gasoline Demand, Lower Imports

Three of Africa’s biggest OPEC producing countries – Nigeria, Angola, and Libya – will increase their productive capacity by 500,000 b/d in the next six to twelve months. But we expect violence, strikes, and natural decline rates to limit total actual production increases from these three countries to only 75,000 b/d in 2019. Africa’s total production should increase by 150,000 b/d next year to 7.4 million b/d.

Big Capacity Increases, Small Production Gains

Three of Africa’s biggest OPEC producing countries – Nigeria, Angola, and Libya – will increase their productive capacity by 500,000 b/d in the next six to twelve months. But we expect violence, strikes, and natural decline rates to limit total actual production increases from these three countries to only 75,000 b/d in 2019. Africa’s total production should increase by 150,000 b/d next year to 7.4 million b/d.

Mexico Fighting to Stay Put

Mexico’s incoming administration says it will increase Mexico’s crude production by 600,000 b/d in two years to reach 2.5 million b/d by 2021. We see gains this size as out of reach in such a short time frame. Instead, we assess that a $4 billion shot in the arm will help Pemex reverse declines and boost production by closer to 20,000 b/d next year, to 1.88 million b/d, and then by perhaps 100,000 b/d in 2020.

Eliminating Permian Bottleneck by 2020

Oilfield Technology:

In the next five years, potential pipeline projects could add over 5 million bpd to US destinations at Cushing and to USGC port locations, significantly increasing US crude oil exports. Elisabeth Murphy, analyst at ESAI Energy, however, points out that “not all of these projects may go forward, but the race to bring more capacity will be key in determining the amount and timing of production growth, not only for the Permian, but for the other US shale basins and the Canadian Oil Sands”.

IMO Bullish for Q419 European Margins

The relative strength of gasoil to high sulfur fuel oil (HSFO) in Northwest Europe will rise to nearly $40 per barrel by the end of 2019 as new IMO fuel specifications begin to impact the market and pricing. During the final quarter of 2019 and in early 2020, gasoil strength will be bullish for refining margins in Europe and globally. It will create a strong incentive for refiners to raise throughput during the final quarter of 2019.

Coincidence Amid Chaos

From NGL pipeline and fractionation contraints and run-away ethane prices in the U.S. Gulf Coast to China’s tariffs on U.S. LPG, uncertainties in the NGL market border on chaos. Nearly six months ago, our monthly updates highlighted robust petchem demand fueling high U.S. LPG exports, cautioning that U.S. LPG terminals will be unable to keep up with export demand. We continue to believe this export constraint will rear its head, at least temporarily, in the next few months. In this month’s Insight chapter, we shift our analysis to NGL takeaway and fractionation capacity constraints and the outlook for

Permian and PADD III NGL production, and especially for Mont Belvieu ethane. Meanwhile, the LPG chapter highlights the latest developments in Chinese and Indian LPG demand and imports.  Coincidentally, just as U.S. LPG exports run into constraints, it seems Chinese and Indian LPG imports are cooling off.