E-15 Impact Limited Near-Term

The E.P.A. will begin the process of allowing sales of E-15 gasoline year-round. Although the waiver will increase ethanol more significantly in the long term, short term demand impacts will be limited by investment requirements and consumer preferences. As a result, ESAI Energy forecasts a high of just 60,000 b/d of additional E-15 sales by 2020, or just 10,000 b/d of additional ethanol blending.

Oil Product Demand Growth Outpaces Supply

Asian oil demand growth of 700,000 b/d will outpace regional throughput growth of 300,000 b/d in 2019. Refiners will reduce utilization rates in the first half of 2019 in response to weaker margins and the strong growth of Middle East supplies. Throughput restraint in the first half of the year will lay the groundwork for stronger refining margins in the second half of the year, particularly from middle distillates.

Strategic Stockpiling to Support Crude Imports

China’s strategic petroleum reserve (SPR) depot in Jinzhou officially started filling in August, bringing the existing depot capacity to a total of 249.1 million barrels. The 31.4-million-barrel Zhanjiang depot will not be commissioned until perhaps the second half of 2019. We estimate that crude stocking in depots will add 70,000 b/d to Chinese crude demand between August and the end of 2018 and another 150,000 b/d in 2019.