The relative strength of gasoil to high sulfur fuel oil (HSFO) in Northwest Europe will rise to nearly $40 per barrel by the end of 2019 as new IMO fuel specifications begin to impact the market and pricing. During the final quarter of 2019 and in early 2020, gasoil strength will be bullish for refining margins in Europe and globally. It will create a strong incentive for refiners to raise throughput during the final quarter of 2019.
From NGL pipeline and fractionation contraints and run-away ethane prices in the U.S. Gulf Coast to China’s tariffs on U.S. LPG, uncertainties in the NGL market border on chaos. Nearly six months ago, our monthly updates highlighted robust petchem demand fueling high U.S. LPG exports, cautioning that U.S. LPG terminals will be unable to keep up with export demand. We continue to believe this export constraint will rear its head, at least temporarily, in the next few months. In this month’s Insight chapter, we shift our analysis to NGL takeaway and fractionation capacity constraints and the outlook for
Permian and PADD III NGL production, and especially for Mont Belvieu ethane. Meanwhile, the LPG chapter highlights the latest developments in Chinese and Indian LPG demand and imports. Coincidentally, just as U.S. LPG exports run into constraints, it seems Chinese and Indian LPG imports are cooling off.