Peace deal in South Sudan adds crude to market

World Pipelines:

As the market eagerly awaits an OPEC+ deal, non-OPEC producers continue to make gains. Sudan and South Sudan are likely to raise crude oil production in 2019, according to ESAI Energy’s recently published Africa Watch. A peace deal in September halted South Sudan’s five year civil war between forces loyal to President Salva Kiir and others backing Vice President Riek Machar. The peace deal has, for now, stopped fighting that has decimated Sudan and South Sudan’s crude production since the latter’s independence in 2011.

Market Alert: Alberta to Cut Over-Supply of Crude

In response to a glut in oil supply in the province, the government of Alberta is mandating a temporary production cut of 325,000 b/d. If the mandate is followed to the letter, it would eliminate close to 20 million barrels of inventories by March 2019, roughly the amount of stock build from the past twelve months. Further production curtailments of 95,000 b/d could last until the end of 2019 if stocks do not draw down significantly. We had forecast Canadian production to fall by 30,000 b/d in 2019. In light of these developments, we are accelerating the decline to 90,000 b/d.

China LPG Imports to Rebound

Hellenic Shipping News Worldwide:

China’s LPG imports will rebound in 2019 after dismal growth of a little over 20,000 b/d in 2018, according to ESAI Energy’s newly published Global LPG Outlook. A new wave of PDH investment will reignite Chinese demand. In a market flush with new supply, exporters will count on an uptick in Chinese demand to stave off a global glut.

China LPG imports to rebound

World Pipelines:
China’s LPG imports will rebound in 2019 after dismal growth of a little over 20 000 bpd in 2018, according to ESAI Energy’s newly published Global LPG Outlook. A new wave of PDH investment will reignite Chinese demand. In a market flush with new supply, exporters will count on an uptick in Chinese demand to stave off a global glut.

New Refining Capacity Weakens Fuel Spreads in Middle East

Diesel and gasoline production in the Middle East will rise next year, as new refining capacity ramps up in Saudi Arabia and Iran, and a damaged unit returns in the UAE. With supply growth of both fuels outpacing demand, the region’s diesel exports will rise and gasoline imports will fall in 2019. This will add bearish pressure to transportation fuel spreads to crude.

Trump Statement Not Oil Policy

Many in the oil patch have pointed to President Trump’s recent statement on Saudi Arabia as a signal to Saudi Crown Prince Mohammad bin Salman (and the world), absolving the prince of guilt for the execution of Jamal Khashoggi and somehow setting up a quid pro quo that requires the Saudis to facilitate President Trump’s perceived preference for low oil prices. That is far too oil-centric an interpretation. President Trump’s statement is for the American people and his own foreign policy team. He wants the focus back on Iran, and knows Saudi Arabia is key to his policies with regard to Iran, not to mention China and Russia. The oil market should resist the temptation of seeing this statement as oil policy. The Saudis still have considerable leeway to pursue their own production policy, notwithstanding President Trump’s oil price tweets.

Latin America Crude: Out with the Heavy, in with the Medium

Latin America’s crude production will increase in 2019. This change will see Latin America’s crude continue to get lighter and sweeter, as Venezuela’s share continues to fall and Brazil’s increases. A lighter, sweeter barrel will be a boon for Brazil once IMO sulfur changes hit but also help support global heavy crude prices relative to light.