In its recently published Five-Year Global Fuels Outlook, ESAI Energy examines the effect of the International Marine Organization’s (IMO) 0.5 percent sulfur content cap on bunker fuels on transport fuel markets through 2023.
“There is a misperception that a supply crunch is imminent,” said Sarah Emerson, an analyst at ESAI Energy. “In a five-year horizon, the potential for non-OPEC supply growth is impressive. This will have a bearing on the degree to which OPEC will have to dip into spare capacity to offset disruptions.”
Oil & Gas Journal:
The outlook highlights three trends that underscore the expectation that non-OPEC crude and condensate supply will increase by an average of 1 million b/d/year during 2019-23:
• Infrastructure catching up with US shale growth.
• Streamlined, cost-effective offshore projects from the Gulf of Mexico, Latin America, and the North Sea brought to production.
• Russia moving to a “coordinated” growth strategy.
Global investment in ethane crackers and other olefins units will lead to overcapacity and intensifying inter-fuel competition in the NGL and naphtha markets, according to ESAI Energy’s newly published Global NGL Five Year Outlook. As ESAI Energy describes, announced projects include a potential 58 million tons of ethylene capacity, far more than global ethylene demand can plausibly grow. However, a closer look at what will pan out leads to the unmistakable conclusion that feedstock demand growth and pricing will be less bullish than many believe.
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.
Hellenic Shipping News:
OPEC has agreed to rollback overcompliance with the original production deal of November 2016. This appears to mean an increase among the voluntary over-complying countries of 450,000 b/d with the bulk coming from Saudi Arabia, Kuwait, and the UAE. However, the communique could also be interpreted as enabling an increase of as much as 1 million b/d, with some members replacing lost volumes from involuntary over-complying countries like Venezuela. At this point, the small step interpretation is more likely.
Jet fuel prices are at six-year highs, and part of the reason is linked to record U.S. shale crude production and the unique properties refiners contend with when they refine that oil
Oil and Gas Journal:
The rise in medium and heavy refiner demand was already pushing the production-cut agreement among members of the Organization of Petroleum Exporting Countries as well as some non-members towards an end by 2019, ESAI Energy points out in its May Global Crude Oil Outlook. The US request for more crude oil and apparent willingness of Saudi Arabia and Russia to respond provides additional rationale.
In its May Global Crude Oil Outlook ESAI Energy points out that the growth in medium and heavy refiner demand was already pushing the OPEC+ deal towards an end by 2019. The U.S. request for more crude oil and Saudi Arabia and Russia’s apparent willingness to respond provides additional rationale. How this “end” is finessed remains to be seen, but clearly the medium and heavy producers of OPEC (besides Venezuela and Iran) will increase production in 2019.
ESAI Energy’s Amrit Naresh is featured in the May 2018 Fuel Oil and Feedstock Trader publication discussing Russia’s Refineries Invest to Cut Fuel Oil, which was based on a presentation given at the Platts Middle Distillate Conference in Antwerp in February 2018.
In July 2011, Russian President Vladimir Putin called the heads of Russia’s leading oil companies to a meeting near St. Petersburg and gave them a choice: increase the secondary processing capacity at your refineries or go bust. Putin had long wanted to improve the value-adding capabilities of Russian industry and see Russia export fewer raw materials and more finished goods, less dirty and more clean fuel.
When it’s too high, consumers start freaking out and using less. When it’s too low, oil companies cut back operations and lay off thousands of workers. Opinions on where the sweet spot currently lies differ widely, but analysts and strategists say it’s probably somewhere between $60 and $70 per barrel.
China’s reforming capacity will grow by 400 000 bpd in 2018, displacing more than 100 000 bpd of the country’s mixed aromatics imports, according to ESAI Energy’s newly published ‘China Gasoline Production and Blending to 2020 Watch.’ After 2019, additional investment will fully wean China’s gasoline producers from these imports.
Hellenic Shipping News Worldwide:
“LPG will be a fast-moving market for the next couple of years,” comments Andrew Reed, ESAI Energy’s Head of NGLs. “The LPG market is prone to imbalances, so one might expect the expansion of supply to lead to a glut that would hamper prices and U.S. exports. But China will soak up more and more LPG in 2019, keeping exporters happy.”