U.S. Exports to Latin America to Drop

Over the next twelve months, global demand growth for both gasoline and diesel is expected to decelerate. The rapid growth of diesel demand in the first half of 2018, particularly in the United States, is set to diminish as higher interest rates and trade tensions create headwinds for the economy. Economic headwinds in combination with higher absolute prices will also be a drag on gasoline demand growth. In China, an expanded “blue sky” policy on retiring polluting diesel vehicles will shift more freight transport to rail, limiting distillate demand.
Meanwhile, global production of transport fuels is expected to continue accelerating as throughput rises, particularly East of Suez. As a result, global transport fuel market fundamentals will loosen and fuel spreads to crude will weaken globally. Downward pressure on gasoline spreads will be particularly pronounced.

Shrinking Latin American diesel and gasoline deficits will also exert bearish pressure on global product markets. Over the next twelve months, Latin America will absorb less U.S. diesel and gasoline as Latin American deficits of the two products narrow.

U.S. Gasoline Surplus Keeps Expanding

After growing by 60,000 b/d year-on-year to an average of 180,000 b/d in the first half of 2018, the U.S.’ exportable gasoline surplus is expected to continue expanding through 2019. This growing surplus will be bearish for the Atlantic Basin gasoline markets and exert downward pressure on spreads to crude as Latin America’s import requirement shrinks and U.S. exporters compete more intensely with European producers to place volumes within the region.