Crude Summit: Global demand will to absorb crude supply
The growing global economy will have enough demand to absorb growing crude supplies, with the petrochemicals sector driving the growth, Horace Hobbs, chief economist at Phillips 66 said.
The global oil demand is going to peak at 100mn-105mn b/d but "it is a real high peak," Hobbs said at the Argus Americas Crude Summit in Houston, Texas. Nearly half the demand growth is going to come from petrochemicals. The industry will crack naphtha to make petrochemicals, which means demand for light crude -- whose supplies are growing with the rising US shale output -- will remain supported.
Growing trade tensions between the US and China have weakened the global economic growth outlook, with the IMF this week again scaling back its projections in the near term to 3.5pc/yr growth for 2019, a drop of 0.2 percentage points from its previous forecast in October.
But Hobbs said he is confident the differences will be ironed out.
"The level of trade tension that we are seeing right now is probably not sustainable -- the two largest economies need to trade," he said. "I cannot help but believe that it is all going to work out in the end."
US crude exports will continue to grow in coming years as output increases. He sees steady global demand for the growing US light crude supplies from shale production as many emerging nations expect steady increases in gasoline consumption. Hobbs expects the US will become the fifth largest crude exporter by 2020 and the second-biggest exporter of high-density polyethylene as the nation adds more petrochemical capacity.
Booming shale production largely in the Permian basin is expected to drive US production above 14mn b/d by 2024, the EIA said today in its Annual Energy Outlook 2019. And US output is likely to remain above those levels until 2040, the agency said.
source: Argus Media
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