This is the March 2019 edition of our North America Quarterly (NAQ), previously released in February in prior years. We have adjusted our release schedule to coincide better with earnings seasons effective in 2019. As usual, it covers all important aspects of the region, with a particular focus on the growth of US production and the impact on regional and global balances for both crude and products. NAQ is designed to be a comprehensive guide to US and Canadian production, midstream projects, US and Canadian crude balances, regional differentials, and the US refining industry.
Inside this edition:
- In Focus – Gulf of Mexico: The Eastern US Gulf Coast surrendered substantial market focus to Corpus Christi, Houston and Nederland in the middle of this decade. But that is set to change this year as offshore production is set to rise this year with several key projects commencing production ahead of schedule and below cost, amid a sharp drop in sour crude imports.
- In Focus – US NGLs production and exports: The unprecedented growth of US NGLs supply has outstripped the country’s ability to consume this rush of purity products. Midstream operators have run their export terminals at extremely high rates, often above design capacity. These firms have announced expansion projects accordingly, increasing US NGLs export capacity by 0.73 mb/d by end-2020 from 2018 levels.
- Outlook for North American crude: The Cushing outlook should grow increasingly constructive from June, but only after a period of consolidation among WTI instruments during Q2 19, especially as formidable near-term risks to WTI-Brent rise once a constructive summer Brent market gets under way. But, as Permian takeaway capacity increased earlier than expected and incremental Canadian supply has been delayed by up to a year, Q4 19 lines up to be supportive of WTI timespreads.
- Outlook for products: US jet fuel production has risen sharply over the last five years, tracking strong gains in US demand. US jet output has grown not only because refining capacity has expanded to handle growing domestic crude output, but also because yields have risen structurally in recent years. Even as US jet demand has returned to levels unseen in a decade thanks to air traffic growth, import requirements have declined and the USGC is emerging as a significant exporter of jet fuel.
- Outlook for production: Q4 18 earnings marked a changing of the guard. Once pioneers of the shale boom, independent operators appear to be poorly positioned for the next phase of shale growth as they lack the economies of scale required to deliver on investor demands. As such, IOCs are set to drive US production growth going forward. Indeed, in 2019, one-third of the 1 mb/d of production growth guided by public operators is expected to come from IOCs.
NAQ also provides a regular, detailed update on: pipeline projects; rail capacity; US PADD-by-PADD crude balances; Canadian regional crude balances; US, Canadian and Mexican regional refinery slates; Canadian crude balances; product demand and cracks; crude imports by grade; shale plays by basin; US independents’ hedging activity in 2019 and 2020; and the latest production data, including rig counts and technological and regulatory developments affecting the domestic oil industry.