Seaborne energy flows: Review 2021 & outlook 2022
As 2021 draws to a close, global seaborne energy markets are still reeling from the turbulent and unpredictable events triggered by COVID-19 that significantly disrupted oil and gas flows.
In this special webinar, Vortexa’s Chief Economist David Wech, Lead Crude Analyst Jay Maroo, APAC Head of Analysis Serena Huang, and Lead Freight Analyst Arthur Richier, came together to analyse where the global markets stand in the road to recovery and what challenges, opportunities and risks are waiting around the corner in 2022.
Core takeaways from the session:
2022 will have a tough start and a bright ending, with plenty of volatility in between!
- The impact of Omicron in Q1 is set to be much larger than originally forecast by the IEA or OPEC
- Refiners and OPEC+ are likely to adjust crude flows as needed, limiting stock builds, and China is unlikely to stage a big comeback.
- IEA supply growth expectations are too optimistic, but OPEC+ and North America will add barrels.
- Fresh supply needs will be much higher as 2021 stock draws cannot be repeated.
- OPEC+ spare capacity may well become a hot issue when demand picks up to pre-pandemic levels in H2 2022.
- Atlantic to Pacific flows may be rangebound in H1, but rise markedly in H2 2022, with quality considerations potentially playing a role.
Product markets & refining:
- Demand came close to pre-pandemic levels in Oct/Nov but is now falling short again on high prices and Covid.
- Refiners in oil and gas producing countries do now enjoy big competitive advantages (feeds & energy), which are set to continue into 2022.
- This underpins US economics, with product exports being a key factor for global oil flows.
- The US is set to regain its grip on LatAm product markets.
- Asia is likely to struggle to maintain product exports out of the region amidst strong inflows from the Middle East.
- Refinery consolidation is set to continue.
- Dirty freight is suffering from short trips (MEG to Asia, less WAf and Caspian crude) and overcapacity.
- Only H2 is likely to bring a more noticeable recovery with US-to-Asia flows as big hope.
- More refining at the margin in producer countries is a concern for the dirty segment.
- Clean tankers enjoyed a strong recovery in 2021, but also here the fleet appears too big.
- Some upside from more exports out of the US, Russia and the Middle East, but these barrels travel relatively short distances.
- EoS to Atlantic Basin clean flows may face resistance, especially in H1 2022.