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3008, 2019

August 2019

Based only on the already announced VLSFO projects, we can already outline the major VLSFO trade flows in 2020 (see Benigni On Oil Markets – Issue 8).

  • The US appears to be best-positioned as of now to take advantage of the upcoming VLSFO demand rally in early 2020, with estimated VLSFO supply out of PADD-3 standing somewhere between 300,000 b/d and 350,000 b/d next year and some additional 75,000 b/d coming from PADD-1 (see Benigni On Oil Markets – Issue 7).
  • Despite some sizeable new VLSFO production capacities coming online next year in China, Singapore, South Korea, and Japan, Asia will still need to find some additional 550,000-600,000 b/d of VLSFO next year.
  • We estimated the missing 410,000 b/d of VLSFO supply next year to come from projects that have not been announced yet.
2507, 2019

July 2019

Crude supply disruptions on geopolitical grounds have reached a stunning 5.3 million b/d, according to our assessments (see Market Watch – Issue 7).

  • Although a bit overlooked due to the focus on discussions surrounding OPEC+ market management, we must not forget other sizeable amounts of production currently locked away temporarily due to geopolitical issues. Including the OPEC+ cuts, we see some 5.3 million b/d of unused crude and condensate supply potential.
  • It is also important to note that this figure represents a realistic potential, which could be achievable within a couple of months, and not simply a theoretical maximum capacity. Besides the deliberate OPEC+ cutback, the largest contributors to this are undoubtedly Iran and Venezuela.
  • The civil wars in Syria and Yemen are still ongoing, with no solution in sight. In the case of the Neutral Zone, it remains unclear whether production will be ramped up in the event of an agreement between Saudi Arabia and Kuwait, as the barrels would fall under OPEC targets.
2606, 2019

June 2019

Last week, PES confirmed its decision to permanently shut its 335,000 b/d Philadelphia refinery, following an explosion in late June – a move that has so far been a boon to the Atlantic Basin gasoline market (see Americas Weekly – Issue 26).

  • According to our estimates, close to 600,000 b/d of refining capacity in Central and Eastern Europe (CEE) has been strongly impacted by the disruption of Druzhba flows. Outside of Belarus, and to some extent the Czech Republic and Hungary, however, other affected countries should be able to find alternate sources of crude supply.
  • We know that a partial restart of the pipeline is expected by the end of May, but assuming a worst-case scenario, in which Druzhba operates at reduced rates through the end of the year, this could see European crude runs come in some 200,000 b/d lower y-o-y on average over 2019.
  • We see a relatively limited impact on most refined product markets, with diesel supply being by far the most vulnerable. Based on the product output of affected refineries and our estimated reduction in intake in this scenario, we could see diesel volumes reduced by around 100,000 b/d on annual average this year, forcing affected countries to source additional supply from neighbouring nations
2205, 2019

May 2019

We see the Druzhba crude-supply outage primarily affecting diesel supply in Central Europe – worst-case scenario, cutting off around 100,000 b/d of supply on annual average in 2019 (see Market Watch – Issue 5).

  • According to our estimates, close to 600,000 b/d of refining capacity in Central and Eastern Europe (CEE) has been strongly impacted by the disruption of Druzhba flows. Outside of Belarus, and to some extent the Czech Republic and Hungary, however, other affected countries should be able to find alternate sources of crude supply.
  • We know that a partial restart of the pipeline is expected by the end of May, but assuming a worst-case scenario, in which Druzhba operates at reduced rates through the end of the year, this could see European crude runs come in some 200,000 b/d lower y-o-y on average over 2019.
  • We see a relatively limited impact on most refined product markets, with diesel supply being by far the most vulnerable. Based on the product output of affected refineries and our estimated reduction in intake in this scenario, we could see diesel volumes reduced by around 100,000 b/d on annual average this year, forcing affected countries to source additional supply from neighbouring nations.
2304, 2019

April 2019

We expect to see a cooldown in transport fuel growth this year (see Quarterly Refining Outlook – Issue 1).

  • We can expect to see a cooldown in transport fuel growth this year, particularly with diesel demand growth falling from just below 500,000 b/d y-o-y to just above 200,000 b/d.
  • We see difficulties for further growth in diesel demand in the US, given the high baseline, with consolidation more likely than further largescale expansion.
  • Currently, we see downward-trending manufacturing PMIs – a leading indicator for gasoil/diesel demand growth – signalling weaker economic growth.
2103, 2019

March 2019

We See Total Inland Fuel Oil Demand 750,000 b/d Less Than the IEA in 2024 (see JBC Energy OnlineInsights 15/03/2019).

  • In its recently published Oil Market Report 2019, the IEA sees inland fuel oil demand rising by some 260,000 b/d in 2020 vs 2019, on the back of demand uptick mainly coming from Saudi Arabia. In our view we do agree that there will be some demand uptick next year, but we see it much less pronounced as most major contributors to demand strength have already turned to cleaner alternatives.
  • The IEA expects inland fuel oil demand to remain strong long after the implementation of IMO 2020. This, however, seems unlikely, as we expect fuel oil discounts to remain limited to 2020 and 2021. Post-2020 we see inland fuel oil demand losing steam and returning to stable declines, in line with what we have observed over the recent years.
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