No Change on Sanctions on Iranian Importers

Following a week during which President Trump met with most of the signatories to the JCPOA, there appears to have been no movement on a concerted approach to Iran that would replace the JCPOA. Moreover, despite somewhat contradictory reporting, the Trump Administration continues to indicate that waivers on sanctions would be limited at best. The loss of Iranian exports continues to look inevitable. This is consistent with the President’s urging of producers to increase output and the discussion of an SPR release.

Distillate Imports to Surge in Second Half of 2018

Despite a growing deficit, in the first half of 2018 European distillate imports remained flat year-on-year at roughly 1.6 million b/d. With regional distillate inventories depleted and the distillate deficit slated to keep expanding, European distillate imports will rise by about 240,000 b/d in the second half of this year and provide bullish support for global markets.

AMLO Price-Freeze Supports Gasoline Demand

President-elect Lopez Obrador’s promise to freeze gasoline prices will support gasoline demand, which is on track to grow by 15,000 b/d this year. An increase in refinery throughput will more than offset the impact on Mexico’s imports though. We expect a modest increase in utilization rates in the second half of the year, increasing gasoline supply by 60,000 b/d compared to the first half of 2018 and reducing Mexico’s import requirement by 40,000 b/d.

OPEC’s New Swing Producer?

Between capacity at new fields and production cuts at mature fields, Russian producers have more than 500,000 b/d of spare capacity, much more than is needed to increase production by the 200,000 b/d implicit
in its latest agreement with Saudi Arabia. If Russia and the Saudis decide to further relax production limits, Russian oil producers will be ready and willing to expand output further.

Is Market Ready for Mariner East 2?

Any delay to the Mariner East 2 project would impact LPG markets from Applachia to Asia, according to ESAI Energy’s analysis of the Mariner East expansion’s impact on U.S. NGL exports. In contrast, ethane exports are emerging much more slowly, according to ESAI Energy’s newly released Global NGL Outlook.

Eastern Power Play Disrupts 850,000 b/d in Libya

Haftar and the Libya National Army have declared that NOC East is now the body responsible for handling the export of the crude through five key ports – Ras Lanuf, Es Sider, Zuetina, Hariga, and Brega. Buying Libyan crude from a company other than NOC violates a 2014 UN Security Council Resolution. As a result, exports from these ports have stopped and production is shutting in. NOC confirmed that 850,000 b/d of production will come offline, bringing Libya’s crude production down toward 150,000 b/d. It’s early to say, but we estimate this disruption will last three to six weeks.

Harder U.S Line on Iran with Higher Stakes

The Trump administration is taking an even harder line on Iranian oil exports than the Obama administration did prior to the nuclear deal, resulting in what amounts to an extraordinarily high stakes game of chicken over the next several months. In the longer term, the U.S’s application of unilateral sanctions risks states and coalitions developing alternative methods to purchase crude oil outside of linkages to the U.S. banking system

UK Ouput Growth Outpaces Norwegian Declines

In the next twelve months, UK crude and condensate production is expected to rise by over 100,000 b/d and approach 1.1 million b/d as a number of major new projects ramp up. Meanwhile, Norway’s output is expected to keep falling by an additional 40,000 b/d to an average of roughly 1.5 million b/d. On balance, North Sea supply will rise by roughly 50,000 b/d to 2.7 million b/d,

2020 BBD Target Insulates Biodiesel

A sharp increase in the RFS target volume for biomass-based diesel in 2020 is both surprising and good news for biodiesel producers. Even though more was blended in 2017, small refinery waivers and E15 threaten demand for surplus biodiesel to fill volume deficits in other advanced and conventional biofuel categories. A higher 2020 target ensures biodiesel blending for RFS will remain high

More Severe Iranian Disruption

Later this year, California regulators will vote whether to extend the state’s Low Carbon Fuel Standard(LCFS) from its current expiration in 2020 to 2030. If it passes, renewable diesel would be the biggest winner among biofuels. A shortage of renewable diesel in California would create a strong incentive for producers to build new capacity in the next decade, particularly in feedstock-rich Asia.