Research Highlights

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

sample-image-twoUS nationwide gasoline inventories plummeted by 7.7 million barrels w-o-w in their largest draw since September 2017 over the week ending 5 April (see Americas Weekly – Issue 15).

  • US gasoline stocks plummeted by 7.7 million barrels w-o-w in their largest draw since September 2017 over the week ending 5 April (EIA).
  • This was thanks in part to a particularly strong draw at PADD-5, where CARBOB assessments have spiked recently, on the back of numerous planned and unplanned CDU and FCC outages, as well as ethanol transport constraints in the Midwest.
  • We nonetheless expect these supportive factors to ease in the coming weeks, which, alongside returning capacity post-maintenance, should see some pressure on the US mogas complex re-emerging towards the month’s end.

US jet fuel exports hit an all-time high in 2018, rising 21% y-o-y to 220,000 b/d, with most of the increase coming from higher flows to Mexico and Canada (see Americas Weekly – Issue 14).

  • US jet fuel exports hit an all-time high in 2018, rising 21% y-o-y to 220,000 b/d, with most of the increase coming from higher flows to Mexico and Canada (+25,000 b/d y-o-y; EIA).
  • This increase in exports was seen even as domestic demand recorded a 1.7% y-o-y uptick to 1.71 million b/d in 2018.
  • Demand in January remained in strong form, recovering from an unseasonably poor December figure to record the highest monthly start the year since 2001 (+40,000 b/d y-o-y).

sample-image-twoUS crude intake has fallen below the 5-year average for the first time since 2017 (see Americas Weekly – Issue 13).

  • US crude intake ticked down over the week ending 22 March, shedding 350,000 b/d w-o-w to settle 1 million b/d lower y-o-y and below the 5-year average for the first time since late 2017 (EIA).
  • Unplanned outages thanks to fires at major refineries at PADDs 3 and 5 are likely to blame, with average utilisation at both dropping 3 pp w-o-w.

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.

We See Total Inland Fuel Oil Demand 750,000 b/d Less Than the IEA in 2024 (see JBC Energy Online Insights 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.

changes to crude demand assessmentsWhere Have Quality Spreads Gone, and Are They Coming Back? (see Market Watch Issue 03).

  • Our crude demand assessments have been revised to the downside over the past several months, sending bearish signals to the market.
  • Even though fuel oil demand has been particularly weak, cracks remaining strong is a sign of conversion flexibility of the global refining system, as well as a lightening global crude slate.

We see recent changes in crude quality steadily lessening the disruption potential of IMO 2020 (see Bottom of the Barrel – Issue 3).

  • The loss of Venezuelan and Iranian crude, coupled with lower output from Saudi Arabia, is expected to reduce supply of high sulphur atmospheric residue (ARES) by around 600,000 b/d by the end of this year.
  • Similarly, the loss of heavy barrels is being offset primarily by US supply gains of sweet crude, which is expected to add over 800,000 b/d of low sulphur ARES relative to 2017.
  • The crude quality changes are therefore facilitating the production of VLSFO, while at the same time helping manage HSFO, by ensuring that less of it is produced.

The FSU East region is moving away from a relatively tight gasoline situation towards a growing surplus at the worst possible time for refiners (see FSU/CEE Insight – Issue 7).

  • The FSU East region is moving away from a relatively tight gasoline situation towards a growing surplus at the worst possible time for refiners, amid global oversupply and historically weak gasoline cracks.
  • We estimate that FSU gasoline balances already started lengthening in the second half of 2018. In 2019, we see the FSU East gasoline balance lengthening by 40,000 b/d y-o-y to a net length of 100,000 b/d - the largest surplus since 2007.
  • Weak to flat demand growth and rising gasoline yields in Russia are expected to contribute to a 25,000 b/d y-o-y lengthening of its gasoline balance in 2019, whilst similar trends are expected make Kazakhstan a net exporter of gasoline.

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US crude net imports have fallen off a cliff recently, which could have a knock-on effect on average US crude intake density (see Americas Weekly – Issue 7).

  • US crude net imports have fallen off a cliff in recent weeks and were last seen standing below 4 million b/d for the first time in at least five years as imports fell 900,000 b/d w-o-w over the week ending 8 February (EIA).
  • The sharp drop-off in net imports suggests that higher volumes of light, sweet shale crude are available to local refiners currently looking to offset the effect of recent sanctions imposed on Venezuela.
  • Higher throughput of light, sweet crude at the margin in the US refining complex carries with it some additional implications, including its potential to further lighten the already-lightening regional crude slate, thereby doing little to ease pressure on ongoing weakness in light ends.

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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.