Planned Canadian Oil Sands projects are being pushed back in response to further delays in pipeline egress and the mandated output cuts by the Alberta provincial government. The outlook for Oil Sands production in 2019 has worsened, with production now forecast to be almost 230,000 b/d lower than last year, averaging 2.7 million b/d. In 2019, lower levels of production will reduce the call on rail, lowering crude-by-rail volumes from the record highs set in the fourth quarter of 2018.
The January start of the Egina field added to Nigeria’s crude oil productive capacity, but Nigerian production will remain close to 1.65 million b/d while the OPEC+ production deal is in place. By the end of 2019, production could grow to 1.70 million b/d. While bigger gains are possible, prospects are clouded by renewed threats from insurgent groups in the Niger Delta, whose campaigns have crippled oil infrastructure in recent years. The January start of the Egina field added to Nigeria’s crude oil productive capacity, but Nigerian production will remain close to 1.65 million b/d while the OPEC+ production deal is in place. By the end of 2019, production could grow to 1.70 million b/d. While bigger gains are possible, prospects are clouded by renewed threats from insurgent groups in the Niger Delta, whose campaigns have crippled oil infrastructure in recent years.
A package of fiscal and monetary expansion, including recently announced tax cuts of $300 billion, should help stimulate China’s economy in 2019. ESAI Energy expects total consumption of gasoline, diesel, and jet to rise by 110,000 b/d to over 7.4 million b/d after growing by merely 30,000 b/d last year.
This year, Europe’s diesel import requirement will contract for the first time in four years by about 50,000 b/d as domestic production growth outstrips demand. As Europe’s diesel imports fall, the origin of these inflows will shift with Middle Eastern diesel crowding out product from the U.S. and Asia.
February was the fourth month in a row China’s crude imports were above 10 million b/d. In the next few months, we expect crude imports to fall well below this level. Maintenance plans by state-owned refiners could take offline 450,000 b/d in March, 950,000 b/d in April and 1.1 million b/d in May.
There will not be a significant expansion of Russian refining to threaten European refiners. Russia will probably only add a little over 200,000 b/d of distillation capacity in the next 3-4 years, with independent refiners adding none. Russian crude processing rates may not grow at all.
In just 18 months, Russia increased pipeline crude deliveries to China from 530,000 b/d to 800,000 b/d. In 2019, however, that volume and other eastbound export flows are unlikely to grow at all. That will restrain the ability of Russia to expand market share in China at a time when U.S. exports to Asia will grow.
India and Pakistan account for almost 5.0 million b/d of crude oil imports, most headed to India. As a result, any conflict or potential for military escalation is relevant to the global oil market. Last week’s exchange of air strikes between India and Pakistan is a stark reminder of how vulnerable the region is to military confrontation.
Oil and Gas Journal: Stable supplies and unstable prices will characterize global oil markets during 2019, speakers generally agreed during a Feb. 21 discussion at the Center for Strategic and International Studies.
Since replacing the British Navy as the guarantor of regional peace after World War Two, the United States has had a heavy presence in the Middle East. Now, as the U.S. comes closer to net oil exports, the country’s engagement with the Middle East, especially under President Trump, is diminishing. Even more than the Obama pivot to the East, the Trump Administration is moving the United States out of the region. That will implications for U.S. influence in the region, not to mention military conflict.
Kallanish Energy: There’s a lot going on in Venezuela since Juan Guaidó, the head of the National Assembly, declared himself the country’s interim president, and the Trump administration imposed new sanctions on current President Nicolas Maduro and state-run PDVSA to support a government transition.
Crude exports from the Gulf of Mexico are picking up at the worst time for American refiners.
Rising production and falling freight rates are behind a surge of overseas shipments of Mars crude, a medium sour oil produced in the U.S. Gulf of Mexico. This comes as sanctions on Venezuela and OPEC’s production cut agreement are limiting the availability of similar types of oil that U.S. refiners are optimized to process.
Mexico’s new President, Andrés Manuel López Obrador, hoped to kill two birds with one stone: reduce theft from gasoline pipelines and diminish Mexico’s reliance on gasoline imports from the US. Instead, the recent pipeline closures and related explosion that resulted in the deaths of at least 96 people have caused a spike in gasoline imports from the US in January. This increase in imports, notes ESAI Energy’s recent Latin America Watch, comes even as supply shortages have dented demand for motor gasoline by as much as 40 000 bpd this month.
Mexico’s fuel shortages could deepen in the weeks ahead following the decision by Mexico’s new president, Andres Manuel Lopez Obrador, to shut product pipelines in an effort to crack down on rampant theft, explains ESAI Energy in a market update issued this morning.
As 2019 stretches out ahead of us, the World Economic Forum will meet this week and is likely to highlight the rise of competition over collaboration between countries, and the implications for the global economy. The global oil market is not immune to these forces. Notwithstanding the “cooperation” represented by the recent OPEC deal, falling OPEC exports and rising US exports will be unsettling this year. Competition in the oil markets is likely to intensify by the end of 2019. That is generally bearish for oil prices.