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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.
2202, 2019

February 2019

Additional light crude runs in the US might remain in check going forwards, due to technical limitations (see Market Watch – Issue 02).

  • The OPEC+ cuts add some further pressure to medium-sour imports to the US which combined with the observed price strength in the very heavy segment speak against a quick fix to the refinery conundrum in the US.
  • A potential rebalancing of the gasoline/naphtha markets might be in the cards for the months ahead with gasoline supply in the US set to decline in the months ahead.
  • In a rather unusual turn of events, we might see US crude intake falling by some 275,000 b/d y-o-y over 2019 due to technical and economical replacement issues of heavy Venezuelan crude and the gasoline weakness already in place.
1801, 2019

January 2019

Gasoline demand growth in Asia this year lays mainly in the hands of China (see Asian Oil Weekly  – Issue 2).

  • China has been the main driver behind gasoline demand growth in Asia in the last several months, accounting for over 75% of total growth in H2-2018 – a trend we see continuing this year.
  • This year, we see demand growing by 60,000 b/d, a relatively conservative estimate coming mainly on the back of a baseline effect as we see the higher levels reached over H2-2018 being maintained over 2019.
  • However, a disappointing performance from Chinese demand amid high retail prices, declining vehicle sales and a strong push for EVs would weigh very strongly on an already oversupplied market. No growth in China would leave the region with just 80,000 b/d of demand growth, mainly coming from India (+50,000 b/d).
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