Diesel and jet fuel exports from the Middle East will stop growing in 2018, according to ESAI Energy's recently published Middle East Watch Products. Saudi Arabia, the biggest distillate exporter in the region, will export a similar amount as it did last year, marking a departure from four consecutive years of export growth. This will create opportunities for other diesel exporters, particularly refiners in Russia and the U.S. Gulf Coast, to increase their share of the European market.
Regional exports of diesel and jet fuel will stall at 520,000 b/d in 2018 after growing by an average of 160,000 b/d every year since 2014. Stabilizing domestic demand for diesel in Saudi Arabia is one reason. The government began phasing out fuel subsidies in 2016 and 2017, leading to a collapse in domestic diesel demand that left increasing volumes available for export both years. This will not occur again in 2018, with the government keeping the price of diesel unchanged. Meanwhile, Saudi refinery output of diesel and jet fuel will stay flat until 2019, when the new Jazan refinery adds 400,000 b/d to Saudi refining capacity.
“Production increases from the region's other distillate exporters, Kuwait and the UAE, will be too small to make up for stalling Saudi supplies this year,” explains Amrit Naresh at ESAI Energy. “With the European diesel deficit set to grow by another 50,000 b/d this year, competition among Russian and U.S. exporters to place barrels in Europe should support middle distillate spreads to crude there. But in 2019, Jazan will provide a boost to Saudi diesel output, and growth in diesel exports to Europe should resume.”
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