We have lowered our assessment for global refined products demand growth but remain cautiously constructive on prices. On the whole, the global economic outlook has weakened since our last report. We have reduced our GDP growth estimate to 3.18% in 2019 and 3.32% in 2020, as we see indications of deteriorating trade and manufacturing activity. North American and European refined products demand has been sluggish in the first half of 2019 due to slowing economic activity.For more on our global economic outlook and significant indicators, see our Global Macroeconomic Overview.
Unless the economic backdrop and ongoing trade disputes worsen, we maintain a generally constructive view of most product prices. For 2019 we expect total product demand to increase by 1.12% and in 2020 we expect product demand to increase by 1.41%. This translates to growth of 1.1 mmb/d in 2019 and 1.4 mmb/d in 2020, driven mainly by jet fuel and liquefied petroleum gas.
The downstream industry is likely to see continued expansions in capacity over the next decade, with resultant shifts in product flows as centers of demand invest in expanding and upgrading their refining capacity. Nearly two-thirds of the planned refined product capacity additions expected will be in Asia. The United States is currently the largest producer of refined products, but China plans to surpass the US in installed refinery capacity within the next decade. Petrochemical feedstock requirements are the primary impetus for capacity additions in China, the US, and Malaysia. Nonetheless, transportation refined products production is expected to expand globally, ending in greater extents of refined products trade. US refinery utilization rates are currently higher than China’s and Chinese refiners, due to the government’s role in business, are expected to continue facing spontaneous or mandated shutdowns by the Chinese government.
However, continued weakness in the industrial and manufacturing sectors could eventually weigh on consumer demand, dragging demand growth even further down. Concerns about the pace of Crude Oil price and global demand growth will be the primary impetus behind products price moves this year and next, evidenced by the buoyancy that global crude oil prices have been on for the last six months, recovery is still very fragile. For more on our global crude oil price outlook and major indicators, see our Global Crude Oil Outlook Quarterly Update.
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