Venezuela now has two heads of state, Juan Guaidó and Nicolás Maduro. The US firmly backs Guaidó and has promised economic and diplomatic support. Maduro, meanwhile, still retains the support of the Venezuelan military. The situation will evolve over the coming days and weeks. The US remains undecided on whether to ban the 500,000 b/d of US imports of heavy Venezuelan crude. Venezuela crude production will decline by 250,000 b/d in 2019 to average 1.1 million b/d.
After growing by almost 1.6 million b/d in 2018, US crude production will slow down this year, but will still rise by 1 million b/d. That year on year average growth however, translates into only 500,000 b/d of growth between December 2018 and December 2019. Growth continues to be led by shale, which rises by roughly 850,000 b/d year on year. New projects are also ramping up in the Gulf of Mexico (GOM), contributing another 150,000 b/d. Total US output will reach over 12 million b/d in the second half of the year, lifting exports of crude oil higher, to average close to 2.5 million b/d in 2019.
Venezuela now has two heads of state, Juan Guaidó and Nicolás Maduro. The US firmly backs Guaidó and has promised economic and diplomatic support. Maduro, meanwhile, still retains the support of the Venezuelan military. The situation will evolve over the coming days and weeks. The US remains undecided on whether to ban the 500,000 b/d of US imports of heavy Venezuelan crude. In the meantime, these developments will continue to provide support to heavy crude prices.
In an effort to reduce fuel theft, Mexico closed several pipelines serving the central and western part of the country for the better part of January. This has caused fuel shortages. Demand will fall in January. More refinery problems mean Mexico’s gasoline import requirement will rise
In 2019, North Sea crude and condensate production will average 2.6 million b/d, roughly equal to 2018 output, as declines in Norwegian supply are offset by gains in the U.K. By the end of the year, North Sea production will return to year-on-year growth as the Johan Sverdrup mega-project starts up.
Changes to IMO specification and bunker market demand are fast approaching, but refiners in Europe and Russia have slowed upgrading capacity investments to reduce high sulfur fuel oil output.
This year, global gasoline and diesel trade flows will shift due primarily to a significant increase in Middle Eastern production of both products. Inflows of gasoline into the Middle East from both Europe and Asia will fall by a combined 160,000 b/d, while outflows of diesel, primarily destined for Europe and Africa, will rise by roughly 150,000 b/d.
Import substitution in China’s polymers and paraxylene markets will negatively affect feedstock demand in markets that export to China, exacerbating oversupply in the naphtha market.
As 2019 stretches out ahead of us, the World Economic Forum will meet this week and is likely to highlight the rise of competition over collaboration between countries, and the implications for the global economy. The global oil market is not immune to these forces. Notwithstanding the “cooperation” represented by the recent OPEC deal, falling OPEC exports and rising US exports will be unsettling this year. Competition in the oil markets is likely to intensify by the end of 2019. That is generally bearish for oil prices.
The U.S. call on domestic biomass-based diesel volumes will remain high in 2019. At the same time, easing trade war tensions will contribute to higher biodiesel feedstock prices. As a result, ESAI Energy is forecasting U.S. biodiesel production to remain elevated in 2019 and biodiesel prices will be higher as well.
China’s December crude imports reached the second highest level, at 10.3 million b/d. After a year of staggering crude imports yet weak demand, and with gloomy economic fundamentals ahead, refiners may reduce high levels of stocks by slowing down crude imports and expediting product exports
As growth in both passenger and freight air traffic continues to slow in 2019, European jet fuel demand will rise by just 30,000 b/d, compared with 60,000 and 80,000 b/d in 2018 and 2017, respectively. Nevertheless, jet fuel will continue to account for the vast majority of total distillate demand growth.
With the deadline for IMO bunker specification changes rapidly approaching, Russian fuel oil output will barely decrease in 2019 and 2020.
Armed groups took over Libya’s Sharara oilfield last month, forcing the National Oil Company to shut down production. NOC says it will not restart the field until local security forces are reformed. This will take time, and we expect Sharara production to remain shut in until the summer. Libya will produce just 800,000 b/d of crude oil until the field restarts, down from recent levels of 1.1 million b/d.
Beijing’s expansion of the import ban on scrap plastics will tighten China’s petrochemical market due to the further loss of recycled raw materials in 2019. This policy, coupled with new PDH and PX projects, will sustain domestic production and thus contribute to overall growth in demand for LPG and naphtha