Last updateMon, 19 Aug 2019 4pm

Oil Market Re-Balancing Slows Down

The outlook for oil demand growth in 2019 is little changed from the last Oil Market Report at 1.2 million b/d. On the basis that the economic outlook in 2020 is better, there will be a rebound to 1.4 million b/d. This is despite the fact that the International Energy Agency has downgraded its estimate for global oil demand growth in 2Q19 by 0.45 million b/d. There are many reasons for this: European demand is sluggish; growth in India vanished in April and May due to a slowdown in LPG deliveries and weakness in the aviation sector; and in the U.S. demand for both gasoline and diesel in the first half of 2019 is lower year-on-year. Unless the economic backdrop and the trade disputes worsen, global growth is nevertheless expected to be higher in 2H19. There will be support from oil prices, which, if they stay roughly where they are today, will be about 8% below the levels seen last year.

Global Chemicals Output Continues on a Solid Note

Data collected and tabulated by the American Chemistry Council show that global chemicals production in the second quarter 2019 is improving, increasing by 0.4% in May and following a 0.3% gain in April. During May, chemical production increased everywhere but Europe. Headline global production was up 1.6% year-over-year on a 3MMA basis and stood at 117.6% of its average 2012 levels.

Among chemical industry segments, May results were mixed on a product basis, with gains in bulk petrochemicals and organics, synthetic rubber, manufactured fibers, coatings and other specialties offset by weakness in agricultural chemicals consumer products, inorganic chemicals, and plastic resins. Considering year-earlier comparisons, growth was strongest in manufactured fibers followed by synthetic rubber, bulk petrochemicals and organics, coatings, and plastic resins.

Chevron Phillips, Qatar Petroleum to Develop Gulf Coast Petrochemical Project

Chevron Phillips Chemical Company LLC and Qatar Petroleum have signed an agreement to jointly pursue development of a new petrochemical plant in the Gulf Coast region of the United States. The U.S. Gulf Coast II Petrochemical Project (USGC II) will include a 2,000 KTA ethylene cracker and two 1,000 KTA high-density polyethylene units. Chevron Phillips Chemical would be the majority owner with a 51% share and Qatar Petroleum would own 49% of the project.

Chevron Phillips Chemical would provide project management and oversight and be responsible for the operation and management of the facility. The preliminary cost of USGC II is approximately $8 billion. Chevron Phillips Chemical and Qatar Petroleum expect a final investment decision (FID) no later than 2021, followed by full funding and the award of engineering, procurement and construction (EPC) contracts, with targeted startup of the new facility in 2024.

U.S. On Track to Become Net Energy Exporter

U.S. crude oil exports reached a new all-time high of 3.3 million barrels per day (b/d) in June 2019, a 1.1 million b/d year-over-year increase, according to the latest Monthly Statistical Report released by the American Petroleum Institute (API). This latest milestone came as the U.S. continued to sustain world-leading crude oil production of 12.2 million b/d, including 5.0 million b/d in West Texas’ Permian Basin. Increasing U.S. crude oil exports are a net positive for American consumers who have benefited from significant declines in energy expenditures since the rise of the shale revolution.

2019 Global Oil Demand Revised Down

In its July 2019 edition of the Short-Term Energy Outlook, the U.S. Energy Information Administration (EIA) forecasts that global liquid fuels consumption, which averaged 99.9 million barrels/day (b/d) in 2018, will grow by 1.1 million b/d in 2019 and by 1.4 million b/d in 2020. EIA has revised down its expectation for global liquids demand growth for six consecutive months. This revision reflects slower expected economic growth in many of the world’s largest oil-consuming countries, lower than expected oil consumption so far this year, and higher crude oil prices. One of the main drivers of EIA’s global oil consumption forecast is global gross domestic product (GDP) based on country-level forecasts from Oxford Economics.

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