Tax Cuts Sustain U.S. Demand Growth

The passage of the Tax Cut and Jobs Act will support U.S. transport fuel consumption this year and prevent any deceleration in demand growth. In 2018, ESAI Energy expects total U.S. consumption of transport fuels to rise by 160,000 b/d to over 15.4 million b/d after growing by 150,000 b/d last year. The effect of the tax cut will be particularly pronounced for gasoline but also provide a boost for diesel, jet fuel and bunker fuel. Rising U.S. gasoline consumption will help to sustain global demand growth at over 400,000 b/d. Meanwhile, global diesel demand is expected to rise by a similar amount in 2018, outpacing supply gains, and providing modest support for spreads.

Global Demand Growth Plateaus in 2018

In 2018, global gasoline demand growth will remain steady at roughly 410,000 b/d as resurgent consumption growth in the U.S. and other OECD nations offsets a slowdown in non-OECD countries. With demand gains largely expected to keep pace with supply, gasoline spreads to crude will narrow only marginally. The NYH RBOB spread to Brent is expected to narrow from $13 per barrel in 2017 to $12 in 2018.

Saudi Crown Prince Continues Power Consolidation

Over the last few days, Saudi Crown Prince, Mohammad bin Salman, has arrested or detained individuals
under the charge of corruption. Yet, these efforts are intended to consolidate his power before he becomes
King. Perhaps this consolidation is essential to the successful execution of his Vision 2030, but it does fly in
the face of projecting a transparent, increasingly liberal economy worthy of foreign investment.