According to ESAI Energy’s recently published ‘Global Fuels Outlook,’ to date, a wave of new petroleum product supply which was expected to move markets has failed to materialise.
In 1Q15, when global petroleum product demand roared to life, product supply underperformed in key countries which have added refining capacity in the Middle East and Latin America. The implications of the slower than expected ramp-up of new capacity is higher refining margins and higher crude processing in markets such as Europe.
‘Global Fuels Outlook’ shares findings about wave of new petroleum supply
The ‘Global Fuels Outlook’ report details the recent shortfall in supply. Actual data through the first quarter reveals that that when global petroleum product demand roared to life, supply underperformed in Saudi Arabia and Brazil. Data for Saudi Arabia shows that its refineries processed 2.2 million bpd of crude in the final month of December but cut processing rates to 2 million bpd in the first quarter, even though it was reported the new 400 000 bpd YASREF refinery ramp-up was underway. In Brazil, the slow ramp up at the newly commissioned 115 000 bpd first train of Petrobras’ RNEST refinery paired with low runs at two existing plants to constrain refined product output in Latin America’s largest market. Refiners there processed 1.9 million bpd of crude in the first quarter, 160 000 bpd less compared to a year earlier.
Competing interests in Saudi Arabia and Brazil
The report highlights that there are competing interests in crude exporting countries such as Saudi Arabia, Brazil and others that may have slowed the expansion of new supply. For crude exporters, dramatically increasing domestic processing undermines crude exports at a time when some exporters are competing for market share in the Asian crude market.
“Investment in Saudi Arabia, Brazil and elsewhere is diesel-oriented, so the lack of supply amid high demand was very bullish for that product,” states ESAI Energy Principal Andrew Reed. Commenting on the possible reasons supply underperformed, Mr. Reed adds: “For some countries, processing more crude places a cap on crude exports when producers are occupied with strategic issues like market share in Asia,” continues Reed. “Product supply may be underperforming as a result.”
“In the end, we maintain our view that a wave of supply from Latin America and the Mideast will have a bearish impact on petroleum product markets. However, this bearish turning point is only likely to happen in late 2015 and 2016.”
Adapted from press release by Cecilia Rehn
Read the article online at: https://www.hydrocarbonengineering.com/refining/17062015/waiting-for-wave-of-new-petroleum-product-supply/