Global demand for transport fuels set to rise

This acceleration will be driven by a recovery in gasoline and diesel demand growth.

ESAI Energy believes that the turnaround in the gasoline market will be particularly pronounced in Brazil and China. In Brazil, where gasoline demand has fallen by roughly 100 000 bpd this year as a result of an increase in hydrous ethanol (E100) due to favourable economics, demand is expected to return to growth next year.

Meanwhile global diesel demand growth will accelerate by 40% in 2019, as consumption in China and Saudi Arabia recovers. Chinese diesel demand, which is set to contract by 80 000 bpd this year due to the implementation of stricter environmental policies, will recover next year. Similarly, in Saudi Arabia, where demand has been declining since 2016 due to a combination of fiscal austerity and the phase-out of subsidies for industrial inputs, consumption is expected to rise slightly next year.

Despite accelerating gasoline demand, increases in refinery output, particularly East of Suez, will far outstrip demand and exert bearish on gasoline spreads to crude in 2019. Diesel spreads will face similar downward pressure in 1H19, as refining capacity increases in the Middle East. But, in the lead up to the implementation of the IMO’s 0.5% sulfur cap on marine fuels during 2H19, diesel spreads will strengthen.

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