EIA expects Brent prices will average $71 per barrel in 2018 before declining to $68 per barrel in 2019
In the June 2018 update of its Short-Term Energy Outlook (STEO), the U.S. Energy Information Administration (EIA) forecasts Brent crude oil prices will average $71 per barrel (b) in 2018 and $68/b in 2019. The new 2019 forecast price is $2/b higher than in the May STEO. The increase reflects global oil markets balances that EIA expects to be tighter than previously forecast because of lowered expected production growth from both the Organization of the Petroleum Exporting Countries (OPEC) and the United States. Brent crude oil spot prices averaged $77/b in May, an increase of $5/b from April and the highest monthly average price since November 2014. EIA expects West Texas Intermediate (WTI) crude oil prices will average almost $7/b lower than Brent prices in 2018 and $6/b lower than Brent prices in 2019 (Figure 1).
EIA expects that OPEC crude oil production will average 32.0 million b/d in 2018, a decrease of about 0.4 million b/d compared with 2017. Total OPEC crude oil output is expected to increase slightly, however, to an average of 32.1 million b/d in 2019, despite expected falling production in Venezuela and Iran, along with decreasing output in a number of other countries.
OPEC, Russia, and other non-OPEC countries will meet on June 22, 2018, to assess current oil market conditions associated with their existing crude oil production reductions. Current reductions are scheduled to continue through the end of 2018. Oil ministers from Saudi Arabia and Russia have announced that they will re-evaluate the production reduction agreement given accelerated output declines from Venezuela and uncertainty surrounding Iran’s production levels. In the June STEO, EIA assumes some supply increases from major oil producers in 2019. Depending on the outcome of the June 22 meeting, however, the magnitude of any supply response is uncertain. EIA currently forecasts global petroleum and other liquids inventories will increase by 210,000 b/d in 2019, which EIA expects will put modest downward pressure on crude oil prices in the second half of 2018 and in 2019.
EIA expects a decline in Iranian crude oil production and exports starting in November 2018, when many of the sanctions lifted in January 2016 are slated to be re-imposed. Iranian crude oil production is expected to fall by 0.2 million b/d in November 2018 compared with October and by an additional 0.5 million b/d in 2019.
The outlook for Venezuelan production is also lower than in the May STEO, with EIA now expecting larger declines in both 2018 and 2019 than previously forecasted. The seizure of state oil company PdVSA’s assets in the Caribbean by ConocoPhillips has diminished PdVSA’s ability to continue meeting its export obligations because it now must rely solely on domestic ports and ship-to-ship transfers to sustain crude oil exports. Venezuela’s domestic export infrastructure, however, is in disrepair and unable to accommodate the volume of exports previously handled out of its Caribbean facilities.
EIA expects that decreases in Iranian and Venezuelan production will be partially offset by increased production from Persian Gulf producers, most notably Saudi Arabia, which will likely increase production in an effort to offset Iranian production losses. Other sources of increasing production include Kuwait, the United Arab Emirates, and Qatar, all of which have been restraining their crude oil output in compliance with the November 2016 OPEC/non-OPEC agreement on production cuts.
U.S. crude oil prices in both the Permian region and in Cushing, Oklahoma, traded at lower values relative to Brent in May, continuing the trend of constraints in transporting crude oil to the U.S. Gulf Coast for refining or for export, as discussed in the April and May STEOs. The Brent–WTI front-month futures price spread, in particular, widened to $11.43/b on June 7, the widest since February 2015. Although transportation constraints to the U.S. Gulf Coast are primarily affecting Permian Basin crude oils, the rapid increase in the Brent–WTI futures price spread in May and early June 2018 suggests some constraints are developing in crude oil transported from Cushing (where the WTI futures contract is delivered) to the Gulf Coast.
Because transportation options out of Cushing are limited, it remains uncertain how much the spread could narrow if Gulf Coast refiners increase refinery runs, which were lower than expected in May. In addition, U.S. crude oil exports are currently limited to higher-cost options which, unless port infrastructure buildout is expanded, will likely maintain a wide Brent–WTI spread. EIA is increasing its forecast of the Brent–WTI spot price spread for the second half of 2018 from $5.49/b to $7.67/b and for 2019 from $5.12/b to $5.79/b.
EIA estimates that U.S. crude oil production averaged 10.7 million b/d in May 2018, up 80,000 b/d from the April level. EIA projects that U.S. crude oil production will average 10.8 million b/d for full-year 2018, up from 9.4 million b/d in 2017, and will average 11.8 million b/d in 2019.
U.S. average regular gasoline and diesel prices decrease
The U.S. average regular gasoline retail price decreased nearly 3 cents from last week to $2.91 per gallon on June 11, 2018, up 55 cents from the same time last year. East Coast prices decreased nearly four cents to $2.84 per gallon, Midwest prices decreased three cents to $2.82 per gallon, Gulf Coast prices decreased nearly three cents to $2.70 per gallon, and West Coast and Rocky Mountain prices each decreased less than a penny to $3.45 per gallon and $2.99 per gallon, respectively.
The U.S. average diesel fuel price decreased 2 cents from last week to $3.27 per gallon on June 11, 2018, 74 cents higher than a year ago. Midwest prices declined nearly three cents to $3.20 per gallon, while East Coast, Gulf Coast, West Coast, and Rocky Mountain prices each declined nearly two cents to $3.26 per gallon, $3.04 per gallon, $3.77 per gallon, and $3.34 per gallon, respectively.
Propane/propylene inventories rise
U.S. propane/propylene stocks increased by 3.7 million barrels last week to 50.8 million barrels as of June 8, 2018, 10.7 million barrels (17.4%) lower than the five-year average inventory level for this same time of year. Midwest, Gulf Coast, Rocky Mountain/West Coast, and East Coast inventories increased by 1.9 million barrels, 1.5 million barrels, 0.2 million barrels, and 0.1 million barrels, respectively. Propylene non-fuel-use inventories represented 5.7% of total propane/propylene inventories.
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In the last week, global crude oil price benchmarks have leapt up by some US$5/b. Brent is now in the US$66/b range, while WTI maintains its preferred US$10/b discount at US$56/b. On the surface, it would seem that the new OPEC+ supply deal – scheduled to last until April – is working. But the drivers pushing on the current rally are a bit more complicated.
Pledges by OPEC members are the main force behind the rise. After displaying some reticence over the timeline of cuts, Russia has now promised to ‘speed up cuts’ to its oil production in line with other key members of OPEC. Saudi Arabia, along with main allies the UAE and Kuwait, have been at the forefront of this – having made deeper-than-promised cuts in January with plans to go a bit further in February. After looking a bit shaky – a joint Saudi Arabia-Russia meeting was called off at the recent World Economic Forum in Davos in January – the bromance of world’s two oil superpowers looks to have resumed. And with it, confidence in the OPEC+ club’s abilities.
Russia and Saudi Arabia both making new pledges on supply cuts comes despite supply issues elsewhere in OPEC, which could have provided some cushion for smaller cuts. Iranian production remains constrained by new American sanctions; targeted waivers have provided some relief – and indeed Iranian crude exports have grown slightly over January and February – but the waivers expire in May and there is uncertainty over their extension. Meanwhile, the implosion in Venezuela continues, with the USA slapping new sanctions on the Venezuelan crude complex in hopes of spurring regime change. The situation in Libya – with the Sharara field swinging between closure and operation due to ongoing militant action – is dicey. And in Saudi Arabia, a damaged power repair cable has curbed output at the giant 1.2 mmb/d Safaniuyah field.
So the supply situation is supportive of a rally, from both planned and unplanned actions. But crude prices are also reacting to developments in the wider geopolitical world. The USA and China are still locked in an impasse over trade, with a March 1 deadline looming, after which doubled US tariffs on US$200 billion worth of Chinese imports would kick in. Continued escalation in the trade war could lead to a global recession, or at least a severe slowdown. But the market is taking relief that an agreement could be made. First, US President Donald Trump alluded to the possibility of pushing the deadline by 2 months to allow for more talks. And now, chatter suggests that despite reservations, American and Chinese negotiators are now ‘approaching a consensus’. The threat of the R-word – recession – could be avoided and this is pumping some confidence back in the market. But there are more risks on the horizon. The UK is set to exit the European Union at the end of March, and there is still no deal in sight. A measured Brexit would be messy, but a no-deal Brexit would be chaotic – and that chaos would have a knock-on effect on global economies and markets.
But for now, the market assumes that there must be progress in US-China trade talks and the UK must fall in line with an orderly Brexit. If that holds – and if OPEC’s supply commitments stand – the rally in crude prices will continue. And it must. Because the alternative is frightening for all.
Factors driving the current crude rally:
Already, lubricant players have established their footholds here in Bangladesh, with international brands.
However, the situation is being tough as too many brands entered in this market. So, it is clear, the lubricants brands are struggling to sustain their market shares.
For this reason, we recommend an impression of “Lubricants shelf” to evaluate your brand visibility, which can a key indicator of the market shares of the existing brands.
Every retailer shop has different display shelves and the sellers place different product cans for the end-users. By nature, the sellers have the sole control of those shelves for the preferred product cans.The idea of “Lubricants shelf” may give the marketer an impression, how to penetrate in this competitive market.
The well-known lubricants brands automatically seized the product shelves because of the user demand. But for the struggling brands, this idea can be a key identifier of the business strategy to take over other brands.
The key objective of this impression of “Lubricants shelf” is to create an overview of your brand positioning in this competitive market.
A discussion on Lubricants Shelves; from the evaluation perspective, a discussion ground has been created to solely represent this trade, as well as its other stakeholders.Why “Lubricants shelf” is key to monitor engine oil market?
The lubricants shelves of the overall market have already placed more than 100 brands altogether and the number of brands is increasing day by day.
And the situation is being worsened while so many by name products are taking the different shelves of different clusters. This market has become more overstated in terms of brand names and local products.
You may argue with us; lubricants shelves have no more space to place your new brands. You might get surprised by hearing such a statement. For your information, it’s not a surprising one.
Regularly, lubricants retailers have to welcome the representatives of newly entered brands.
And, business Insiders has depicted this lubricants market as a silent trade with a lot of floating traders.
On an assumption, the annual domestic demand for lubricants oils is around 100 million litres, whereas base oil demand around 140 million litres.
However, the lack of market monitoring and the least reporting makes the lubricants trade unnoticeable to the public.
Headline crude prices for the week beginning 11 February 2019 – Brent: US$61/b; WTI: US$52/b
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