Transport Fuel Demand Plateaus in 2020

After rising by 160,000 b/d last year, European demand for transport fuels will rise by 100,000 b/d this year to an average of 9.7 million b/d as gasoline and jet fuel demand growth decelerates and residual bunker consumption falls outright. This slowing trend will continue through 2020, when European transport fuel consumption growth grinds to a halt, buffeted by economic headwinds.

Market Alert: Russian Crude Exports to Soar

Russian crude exports will reach a multiyear high of 5.7 million b/d in April, 400,000 b/d higher than average exports in the previous 5 months. The jump in exports will encourage more long-haul shipment of Russian crude from European ports to Asia. Extended maintenance at Tuapse, which will result in the loss of an unusually high 600,000 b/d of distillation capacity in April, has triggered these high exports.

Restructuring of Freight Transport at Diesel Demand

Beijing’s restructuring of freight transport will prevent the country’s diesel demand from growing much in response to an upturn in manufacturing and construction activity. That positions China’s refining sector to produce and export more diesel in response to IMO changes. As a result, China’s diesel surplus will expand to at least 230,000 b/d in 2019.

FSU Exporters Back Away from Asia

Each time Russia raises production ahead of an OPEC+ deal, there is an increase in exports from European ports, much of which is diverted to Asia. Most recently, FSU deliveries shot up by 500,000 b/d to 2.4 million b/d in late 2018. For most of the first half of 2019, FSU deliveries will be sustained at close to that level. From June through the end of the year, however, we expect a 300,000 b/d decrease.

Light Distillate Too Heavy for Singapore Margins

Singapore refining margins were extraordinarily weak early in 2019, dragged down by poor naphtha and gasoline cracks. There will be only a moderate recovery of light distillate in 2019. Consequently, toward the end of 2019 when middle distillate strengthens, benchmark Singapore refining margins will only return to “ordinary” levels. This will prevent runaway throughput growth in Asia.