Diesel, marine gasoline and jet fuel (collectively known as middle distillates) account for more than one-third of global oil consumption. Middle distillates are more closely associated with economic growth than other petroleum products due to their use in road transport, shipping, aviation and manufacturing.

Demand for middle distillate oil has become a key factor affecting oil prices

Market analyst John Kemp wrote in a report that as the most important refining product, the demand for middle distillate oil Inventory conditions are closely related to oil price trends and the trend of the oil futures curve. Therefore, the pace of middle distillate demand growth and inventory levels will be key factors in oil price movements in the coming years.

Camp believes that during periods of expansion in industrial activity and economic growth, demand for middle distillates surges and their inventories decline. If the current global economy continues to grow, demand for middle distillates will rise, pushing up crude oil prices. Higher oil prices will trigger inflation and could lead to a slowdown in the economy, or the global economy could slow down due to trade tensions, leading to an increase in intermediate distillate stocks.

BP's "Statistical Review of World Energy 2018" shows that global medium distillate consumption last year was 35.307 million barrels per day, accounting for 36% of global daily oil consumption of 98.186 million barrels per day. Stricter fuel regulations are said to be coming soon. This follows an expected surge in demand for middle distillates from the maritime industry.

Strict limits on fuel sulfur content - aimed at reducing emissions - will drive higher demand for middle distillates such as diesel and marine oil, analysts at Morgan Stanley said. Crude oil demand.

Data from Morgan Stanley shows that this will increase crude oil demand by 1.5 million barrels per day, potentially pushing oil prices to $90 per barrel in 2020.

Martijn Rats, global oil strategist at Morgan Stanley, said in May this year: “In the next few years, we expect the supply of middle distillates to be tight, which will lead to crude oil varieties such as Brent crude oil Prices are rising."

Middle distillates and their inventory levels also tend to be highly correlated with the Brent crude oil futures curve, as well as with the Brent crude oil spot price.

Market analyst Kemp also pointed out that the extraction of middle distillates is more closely related to changes in the Brent curve than changes in gasoline inventories.

During periods of excess supply of middle distillates, such as in 1998/99, 2001/02, 2009/10, and 2015/16, economic growth was slower, while the Brent crude oil futures curve has been At a premium, this suggests there is an oversupply of crude oil, making it profitable to store oil for future sales.

Shipping regulations and economic growth boost demand for middle distillates

In a period of strong economic growth, middle distillate inventories have been very tight and the Brent futures curve Having been in a contrarian trend - with prices in recent months at a premium relative to future prices - is a sign of a tight and undersupplied market.

During the recent oil price cycle, middle distillate inventories remained high in 2015 and 2016. At the time, the global oil glut was at its peak and oil prices fell to 10-year lows. In 2017, when oil prices began to rise and stocks, including distillates, began to fall, the Brent curve inverted into backwardation, one of the key objectives of OPEC's production cuts.

The U.S. Energy Information Administration said last week that U.S. distillate inventories are currently low for this time of year. The U.S. Energy Information Administration estimates that U.S. distillate consumption increased 5% compared with the same period in 2017, primarily due to increased trucking activity, the primary use of diesel fuel. "Demand for trucking services tends to be closely tied to economic growth and industrial activity, and demand in both areas was higher in the first half of 2018 compared with the first half of 2017," the EIA said.

Upcoming shipping regulations are one of the factors determining PetroChina's demand growth. Another is the pace of global economic growth. If the current economic expansion continues, demand for middle distillates will surge and lead to higher oil prices. But high oil prices will not last long, as this will slow down the growth of oil demand, leading to the next oil price cycle.