The world gasoline market is on the brink of its first significant growth in a decade. The United States will consume more gasoline in 2014 than in 2013, reversing the trend that has cushioned global markets from rampant demand growth in Asia, Africa and the Middle East in recent years. Overall world gasoline demand consumption is likely to rise by 0.4 mb/d to 0.5 mb/d in 2014.
Global gasoline and naphtha prices found strong support at the end of 2013 from petrochemicals demand amid tight spare capacity in ethylene markets and solid Asian demand ahead of the Chinese Lunar New Year festival. But naphtha's strength is likely to fade in the coming months as the turnaround season for naphtha crackers gets underway and alternative feedstocks such as propane become more competitive with the end of the northern hemisphere heating season.
US gasoline production has surged with cheap domestic crude oil spurring record high crude oil processing rates by Gulf Coast refiners. Latin American import requirements are on the rise, however, with refinery problems mounting in Venezuela and Brazil. High US gasoline production has driven down domestic retail prices, encouraging consumption. Combined with a strengthening economy, North America is poised to return to gasoline demand growth.
European gasoline margins recovered in December as strikes idled four French refineries but inventories rose over the holiday season amid slow demand. European refiners may get relief in the spring, however, as growing US consumption means European supplies will be needed to meet the widening deficit in Latin America. But the situation becomes more challenging towards the end of the year when European refiners will have to export more gasoline and naphtha to East of Suez markets to sustain output in the face of growing North American production.
Asian gasoline demand should post good growth in 2014 even accounting for a slowdown in China. Demand in Southeast Asia is particularly strong with signs emerging that Indonesia has worked through excess inventories and may be ready to step up purchasing. Refinery closures in Japan and Australia will support balances as well as heavy turnarounds in the second quarter. Petrochemicals producers should provide support to the market through high utilisation rates of ethylene crackers as the global ethylene cycle nears its peak. New condensate splitters will boost Asian naphtha supplies, however, towards the end of the year.
The Middle East will remain a gasoline importer despite the launch of Saudi Arabia's 0.4 mbd Satorp refinery in Jubail. Solid demand growth will offset the 0.1 mb/d in new supply from Satorp. More refineries are due to start up soon although timetables for the completion of both the 0.4 mb/d Yasref refinery in Saudi Arabia and the 0.415 mb/d expansion of the United Arab Emirates' Ruwais plant appear to be slipping.