The Middle East’s exportable surplus of diesel will grow by 90,000 b/d in the second half of 2018 to reach 490,000 b/d, with Europe absorbing most of the increase. New refining capacity in Saudi Arabia and Kuwait will boost the region’s surplus further in the first half of 2019, but stagnating import needs in Europe in that period could lead to an oversupply, putting pressure on diesel spreads to crude.
The strength of Russian crude demand and improving notional refining margins contrast with reports of weak Russian refining margins. Despite the tax maneuver and other setbacks to refineries, annual crude demand will bounce back from its recent low of 5.6 million b/d in 2016 to 5.75 million b/d in 2018. Coupled with secondary unit investment, higher throughput assures growing gasoline and diesel exports.
Plentiful crude, big increases in distillation capacity and decelerating petroleum product demand growth will pressure petroleum product spreads in 2018 and early 2019. The bearish pressure will not last long though. In the second half of 2019, there will be a diesel-driven recovery of refining margins as the market anticipates a spike in demand for gasoil and low sulfur fuel oil.
Proposed 2018 RFS volume targets were announced yesterday. With only a small reduction in target volumes for advanced biofuels, ESAI Energy continues to project higher D6 RIN prices later in 2017 and in 2018. Without increased sales of higher ethanol blends, obligated parties will need to turn to banked RINs to satisfy obligations.
As ESAI Energy first discussed in early April, 2018 Renewable Fuel Standard targets would be bullish for RIN prices in 2017. Expectations that mandated volumes in 2018 will remain near 2017 levels and current market fundamentals point to a shortfall in D6 RINs and higher prices by the end of the year.
The outage of Colonial Pipeline’s gasoline line temporarily eliminates an irreplaceable source of gasoline to the East Coast. The disruption will cause NYH gasoline to be priced at a premium that will…
Even as Latin America’s refining sectors remain under pressure from disruptions and economic decisions to reduce run rates, the regional diesel deficit will not expand as demand growth remains elusive into 2017.