BAKU, Azerbaijan, May 17. In the latest analysis, global diesel prices are anticipated to experience a mixture of challenges and potential growth in the coming years, Trend reports with reference to Fitch Solutions.
The elevated refining margins observed in the first quarter of 2023, coupled with expectations for a recovery in Brent crude prices, will support average diesel prices. However, the latter half of the year may witness further contractions in diesel refining margins due to a deceleration in the global economy, which continues to impact demand.
The current year began with a deteriorating macroeconomic outlook, leading to a decline in diesel demand across North American and European markets. Experts predict that the weakness in these regions' economies will persist, thereby exerting pressure on demand and refining margins throughout the remainder of the year.
Despite the declining refining margins in the latter part of 2023, analysts project the annual average prices for diesel across key locations such as New York, Rotterdam, and Singapore to average around USD/104bbl, indicating a bullish trend compared to the current spot levels. Nevertheless, in the long run, the diesel market is expected to experience weakening prices as Asia and the Middle East ramp up their production, resulting in a healthy surplus until 2027.
Forecasts suggest that diesel prices will continue to decline, with an average of USD/95bbl projected from 2024 to 2027, driven by significant capacity additions in Mainland China and GCC countries. China's refining capacity is estimated to increase by 1.2 million b/d by 2027, mainly focusing on middle distillates production to meet the recovering transport and industrial sectors. Additionally, Kuwait and the UAE will witness a combined additional capacity of 680,000 b/d by 2027, supported by the anticipated full operational capacity of the Al Zour mega refinery (615,000 b/d) by 2024.
Looking ahead, emerging markets in Africa, Asia, and Latin America are expected to lead future diesel demand growth, benefiting from positive economic and demographic outlooks. Conversely, North America and Europe may experience stagnant consumption due to sluggish economic growth prospects and efforts towards decarbonization. Overall, global diesel demand is projected to increase by 5.2% by 2027, providing some stability to diesel prices in the long term.
Furthermore, the expectation of a global macroeconomic improvement in the coming years will also contribute to supporting diesel demand. Analysts anticipate a rise in global real GDP growth from 2.1% year-on-year in 2023 to an average of 2.9% year-on-year from 2024 to 2027, providing additional optimism for the market.
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