The crude supply squeeze on Russian barrels has meant less discounted oil. Refinery runs have seen modest growth due to rising naphtha and jet fuel demand this year, but diesel and gasoline are peaking or showing slight declines moving forward. India presents a similar picture: some growth is expected, but major refinery expansions and new projects have faced delays. This has introduced weakness and uncertainty into the market. If demand strengthens later this year, we could see some recovery in activity.
Outlook for China’s economic growth?
The country is pursuing an expansionist approach in economic policy – which is about securing demand beyond its own borders. It continues to fuel growth through port acquisitions, roads, and pipeline infrastructure abroad. While it’s still early in the year, we expect to see more evidence of this trend in the coming months.
How is OPEC+ likely to manage output quotas going forward?
One immediate factor to highlight is the expansion of Mideast refinery runs, which is increasing the flow of products into the market. Right now, during the peak maintenance period in the Atlantic Basin, this dynamic is putting significant pressure on refining margins. With global oil demand growing just over a million b/d year-on-year, much of that demand is not in diesel or gasoline, and is also not driven by China, as it traditionally was. The global crude balance might be in a slight deficit, but the total liquids balance, accounting for refined products, is in surplus. This growth phase, particularly in the second half of the year, will be a key factor to watch in terms of downward pressure on refining cracks and, ultimately, on margins. Non-OPEC+ supply growth is projected at 1.4 to 1.5 million b/d year-on-year, compared to just over 1 million b/d in demand growth. This leaves the crude market in a slight surplus - even before considering any potential OPEC+ production ramp-ups.