Oil glut still on the table for 2019 -Argus Americas Crude Summit
Petroleumworld 01 23 2019
The threat of a price-crushing oversupply of crude is still possible this year, according to Rapidan Energy president Robert McNally, but refined products prices will likely see significant increases as a new standard for cleaner marine fuel takes effect in 2020.
Even with production cuts from Opec and non-Opec members starting to bring balance to oil markets there are plenty of bearish indicators — from slowing economic growth in China and India to the strengthening dollar, McNally said.
"We are not out of the woods yet for a glut," McNally said at the opening dinner at the Argus Crude Summit in Houston, Texas, on 22 January.
Baring a major geopolitical conflict, McNally said the risk is greater for significant price drops in the near future.
But the planned implementation of low-sulphur marine fuel requirements by the International Maritime Organization (IMO) in 2020 will likely drive up distillate prices as it appears refiners will be hundreds of thousands of barrels per day short of supply, he said. McNally sides with the Paris-based IEA and its predictions of a 20-30pc increase in diesel prices versus a more conservative single-digit price increase predicted by the US Energy Information Administration.
The IMO issue is likely not on the agenda for the White House, McNally said, but as soon as an aide explains to President Donald Trump how it could increase heating oil prices sharply for voters in states he needs badly in 2020, like Pennsylvania, or could impact fuel prices at the pump, it will become a priority.
"A US president will do almost anything to avoid a fuel price spike," McNally added.
Even Trump's hatred of Iran was not enough to overcome the fear of fuel price spikes, he said. When it became clear last year that Saudi Arabia lacked the spare production capacity to replace all the Iranian crude Trump had hoped to take off the market through sanctions, the administration allowed numerous exemptions.
The Argus Americas Crude Summit continues today and tomorrow . Other speakers include former US national security advisor HR McMaster, Continental Resources chief executive Harold Hamm, Societe Generale head of oil research Michael Wittner and CME global energy head Peter Keavey.
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