Refined product prices had been range-bound for several weeks, but a spate of news has driven prices higher. In our latest Global Refined Products Outlook Quarterly Update - 1Q2019 we revised our lower outlook for estimates based on lower baseline prices at the start of the year. However, we remain overall constructive, and given current supply and demand, we keep our cautiously optimistic view throughout the year.
Globally, gasoline is outperforming fuel oil, jet fuel, and diesel demand. Gasoline demand growth is being supported by seasonality this month, but also by stronger than expected economic activity in several major markets including the US, Brazil, China, and India. These stronger-than-expected economies are supporting growth in the rest of the products as well although a global economic slowdown remains a risk. We suspect that in the month ahead with the current bullish momentum will reduce, although if reduction does not happen, we will make a subtle revision.
Current Price Outlook versus Actual
We will continue to closely watch supply and demand data as official volumes are reported. At the moment, economic outlook indicates that supply is in line with our expectations while refinery runs have remained stable, driven by healthy margins on all products since beginning of this year.
Globally refined products exports are becoming more competitive with the US leading the way. Structural differences in global oil outputs and crude stocks will have a reflective impact on refining margins and refined product differentials. Challenges include a gasoline demand slowdown due to efficiency; 2020 International Maritime Organization’s marine fuel regulations; flourishing petrochemical feedstock demand in US and Asia; US light oil production growth; and declines in medium-heavy crude oil production.
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