According to ESAI Energy's recently released Two-Year Global Fuels Outlook, global demand for gasoline, gasoil, jet fuel, kerosene, and fuel oil is expected to rise by a combined 770,000 b/d in 2019, following an increase of just 440,000 b/d this year. This acceleration will be driven primarily by a return to demand growth in China. However, in 2020, a slowdown in global economic growth, in combination with relatively high petroleum product prices, will limit demand growth to 500,000 b/d.
The Two-Year Global Fuels Outlook argues that the likelihood of a significant slowdown in global economic growth, if not outright recession, is rising due to a combination of factors including IMO-supported oil prices, uneven GDP growth, struggling emerging markets, divergent monetary policies among major economies, potential fallout from an intensified U.S.-China trade war, and geopolitical uncertainty. ESAI Energy analyst Ian Page states that “while predicting the timing of a notable slowdown is difficult, we expect global economic growth to decelerate over the next two years. This will have a noticeable impact on product demand growth outside of IMO supported gasoil.”
Slow product demand growth will be mostly bearish for product spreads to crude. ESAI Energy expects gasoline and fuel oil spreads to crude to continue weakening through 2020. However, middle distillate
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