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Unprecedented crude prices and widening product cracks are
expected to result in demand destruction of about 1.0 MMb/d (major
refined products basis) in 2022, relative to our previous
outlook.
On a major refined product basis, the largest 2022 annual
demand destruction will be observed in Europe (-300,000 b/d), CIS
(-200,000 b/d), and mainland China (-200,000 b/d). Overall, we
still expect global demand to grow, albeit at a slower pace
relative to our previous forecast, at 2.6 MMb/d and 2.3 MMb/d year
on year for 2022 and 2023, respectively.
According to our Commodities at Sea data, Russian loadings of
residues have been reduced by 43% in March versus February, fuel
oil loadings have similarly been reduced, and we anticipate larger
reductions in Russian loadings in the upcoming months. At the same
time, mainland China is considering introducing an export ban amid
high prices
The Russia-Ukraine conflict amplifies the potentially
tightening middle distillate and gasoline markets through
2023.
Risks to our base case include demand destruction from high
prices becoming more pronounced than anticipated, mainland China
releasing higher product exports in a high-energy environment, and
delays to our projections on the Middle Eastern refinery capacity
coming onstream.
The 2022 environment is still shaping up to be among the
highest-margin environments in years, and refiners are expected to
respond where possible. Global crude runs are forecast to ramp up
through the summer months, although still remaining below
pre-pandemic levels as a result of recent rationalization.
According to the IHS Markit Economics and Country Risk
Containment Index, China is experiencing a higher level of
containment in response to their localized COVID-19 outbreak in
March and April which should have a noticeable impact on product
demand.
Posted 31 March 2022 by Stephen Jew, Director, Global Refining and Marketing, S&P Global Commodity Insights
This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.
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