Research Highlights

Here you will find regular updates on some of the most notable research outcomes generated by our team of analysts.

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).

US gasoline flows to Europe at new record level (see Americas Weekly issue 1).

  • Gasoline exports to Europe at almost 80,000 b/d in October.
  • 33% higher than the previous record seen in November 2011.
  • Vast majority of flows headed for Netherlands.

Can gasoline trade at a discount to HSFO in 2019? (see Market Watch Issue 11).

  • On a barrel basis, there is small but noteworthy chance the two fuels trade close to each on average, especially in H1-2019 when we expect crack spikes for HSFO and continued very weak gasoline.
  • Mogas is pricing more like a ‘residue’ than a typical clean fuel, with the combination of a lightening crude slate and huge investments in light ends-focussed refining capacity making it difficult to avoid supply even when prices are weak.
  • The chances would increase if we continue to see lacklustre demand data for mogas, such as has been observed for many months already this year.

Total US crude and NGLs supply surged over the first nine months of the year. But it is even more impressive if we estimate it on a weekly EIA data basis (see Energy Market Report– 7 December).

  • On a 4-week average basis current US crude production is estimated above the 12 million b/d mark. Total crude and NGLs supply is now close to 17 million b/d, up 3 million b/d since the beginning of 2018.
  • Record high production logically raises some questions whether infrastructure limitations are really an issue.
  • At the end of November US crude exports broke another record, climbing to 3.2 million b/d.

Oil Demand Growth Lacklustre for 2019 (see Global Refinery Margins– Issue 48).

  • Our global oil demand growth outlook for 2018 is currently 1.05 million b/d, significantly below the IEA’s projected 1.3 million b/d.
  • We see a slowdown in economic growth limiting potential upside to demand growth this year and next.
  • Should Brent prices next year fluctuate around the $65 or $75/bbl range, the overall effect on demand growth would be limited, still leaving us with the problem of an overall long total liquids balance in 2019.

sample-image-twoOur take on the two most probable scenarios for the upcoming OPEC meeting (see Energy Market Report– Issue 23 November)

  • 1) OPEC essentially maintains current output accepting price slumps.
  • 2) The group cuts strongly in 2019 and keeps 2020 production at a similar level.
  • In the first scenario, crude volumes from the Middle East grow by 500,000 b/d in both 2019 and 2020. The resulting price fall would limit production additions from the US to 500,000 b/d next year and see output only falling in 2020, as shale producer’s reaction to market forces will be delayed by around one year.
  • Should OPEC decide to cut output from the Middle East by an estimated 1.3 million b/d in 2019 and keep supply at that level in 2020, elevated prices would lead to shale production in the US to surge by around 1 million b/d in each of the two coming years.


Global total liquids supply is seen increasingly dominated by US crude and NGLs production (see Benigni on Oil Markets – Issue 08)

  • Policies implemented by the OPEC+ countries or the US are currently the major crude price determinants.
  • Economic slowdown, coupled with strong supply, and forecasts for growing flows in the months ahead, are likely to put pressure on global crude prices.
  • The current situation of oversupply is particularly pronounced on the light ends, a function of growing US shale oil supply and related NGL production ramp-up.
  • It remains to be seen if OPEC+ can win the uphill battle against US shale. If the OPEC+ aims for prices which are far beyond marginal supply/demand indications, potential cuts might become very costly.

sample-image-twoThe US was not the only contributor to weaker-than-initially-expected refinery activity in October (see Crude Oil Barrel– Issue 11

  • Chinese refining strength failed to compensate for more intense turnaround activity in Japan, South Korea, India, and Australia. The wider Asia-Pacific region thus turned into the second-largest contributor to globally weaker run levels.
  • The October downwards revisions have largely been carried over to November.
  • Nonetheless, average crude demand in November is still forecast to increase by 1.7 million b/d m-o-m. It is also expected to start reversing the recent trend of falling refined product inventories and lead to a correction in simple distillation margins.

The exceptional strength in diesel cracks and the high premium to gasoline on a tonne basis could be read a distress signal from the market (see Middle of the Barrel – Issue 10).

  • At the moment, it seems likely that the market will price out more gasoline-focused refineries amid oversupply whilst providing support for middle distillate producers.
  • The current situation, where European gasoline-focused simple refinery margins are in negative territory at a time when diesel-focused ones are in the green seems to indicate the future direction of the market.
  • Therefore, we expect most refineries coming back from maintenance in Europe to be diesel-focused. At the same time, gasoline-focused plants will likely be incentivised to cut runs.

sample-image-twoUS crude stocks continued their rally (see Americas Weekly – Issue 42).

  • Stock builds rose to just under 29 million barrels over the last five weeks, EIA data shows. Only in the week ending 19 October inventories increased by more than 6 million barrels.
  • Main drivers behind the uptick were PADDs 2 and 3. Stock builds at PADDs 1, 2, and 5 remained somewhat close to their respective 5-year levels.
  • Cushing is still shy of usual levels, probably by several weeks of similar builds. Going forward, we see inventory levels there to keep building, amid strong production and limited pipeline capacity to the USGC.