So far, the partial U.S. government shutdown has had only limited effects on GDP growth in all likelihood. U.S. industrial production data showed a major gain for manufacturing output in December. Chinese exports and imports turned negative, and leading indicators of Chinese trade activity pointed to further weakness. In the euro area, industrial production showed a large decline, while car sales recovered gradually.

Asian oil products demand growth has eased but it is expected to remain robust, with Platts Analytics growth projected at 860 MB/D for 2019. The increase in oil products demand in the Asia-Pacific region is coming mainly from the transport sector, with its share expected to rise further this year. Gasoline share of transport fuels is expected to ease in 2019, with jet fuel share rising. Asian refineries are getting more sophisticated and their cracking-to-CDU ratio has risen continuously over the past few years. South Asia has improved the most among Asian refiners in terms of cracking ratio due to upgrading works in India, but China is still ahead. In China, the growing influence of independent refineries has been apparent, and they will account for 68% of CDU capacity additions for 2018-19 with two major independent refineries coming on stream. The rise of Asia’s gasoil/diesel surplus will cause some short-term pains for regional refiners this year, but it will create a buffer to ease the region’s transition to IMO 2020. Overall, Singapore cracking margins are expected to stay modest at $4.40/Bbl for 2019 before rising to nearly $8/Bbl in 2020.

Overall commercial stocks added 5 MMB to storage, which as anticipated was led by builds for the key light products. Gasoline storage grew by 7.5 MMB, while distillates gained about 3 MMB. Gasoline and distillates are anticipated to continue building by 5.6 and 2.8 MMB respectively for next week. Despite far lower runs, as expected, and higher production, crude inventory dropped by 2.7 MMB. This was led by the about 3 MMB/D of crude exports, up sharply from the previous week. Crude field production reached 11.9 MMB/D for the latest week, up 200 MB/D from the previous week, and the highest level ever. High production will continue supporting crude inventory gains, adding 0.5 MMB for the next week. Cushing drew by 0.7 MMB and a further 0.4 MMB draw is expected for the next week. Crude runs were down by 340 MB/D on the week to 17.2 MMB/D. Runs are expected to continue dropping, reaching under 17 MMB/D for the next week. Runs will continue declining with turnaround season ongoing.

Demand posted a solid gain of 772 MB/D, with a large part of the rebound in gasoil, but also kero. Runs stayed high with no planned turnarounds in the offing. Despite the demand rebound, finished product stocks were little changed, but crude stocks jumped 2 MMBbls. The refining margin indicator slipped due to weakening naphtha and gasoline cracks, while implied marketing margins remain strong.

India’s petroleum product demand rebounded in December, with growth of 3.6% year-on-year, having contracted by 2% in November. According to the latest data from the Petroleum Planning and Analysis (PPAC), India’s product demand increased by 167 MB/D year-on-year in December, driven by gasoline and gasoil, which were up by 60 MB/D and 58 MB/D, respectively. For the whole of 2018, India’s total product demand was up by 195 MB/D or 4.1%, which was a marked improvement from growth of 150 MB/D seen in 2017. For 2019, Platts Analytics expects India’s total product demand to grow by 260 MB/D or 5.3% on robust economic activity, with GDP to grow at 7.2%. Lower oil prices and improving rupee will also be supportive for India’s demand growth of petroleum products. Overall, gasoil/diesel and gasoline will continue to drive demand growth this year, so will LPG due to petchem feedstock demand and as the government continues to push for the use of LPG as a cooking fuel across the country, but the latter will soon reach a saturation point, which will lead to lower growth in the coming years.

Platts Analytics has undertaken a major bottoms-up study of DUCs using propriety Wellscape data. We have found that DUCs in the Permian and DUCs in the non-Permian shale plays exhibited very different behavior in 2018. Permian DUCs increased 19% due to outside constraints such as pipeline takeaway capacity, widening commodity price differentials, and a shortage of experienced frack crews. The non-Permian plays experienced a 9% decrease in DUCs on a slowdown in drilling activity. In recent months, however, the overall DUC count has been ticking higher. In the Permian, takeaway capacity limitations continue to constrain completions, although we foresee a DUC drawdown when new takeaway capacity is installed in late 2019. Outside of the Permian, in most other basins, DUCs remain in decline and we expect this trend to continue in these other basins as operators maintain or decrease drilling activity in 2019.

At midmonth, January looks to be colder than the 10-year normal by 4% for the three major OECD markets with oil-heat demand stronger than normal by 244 MB/D. The markets are roughly 1% warmer on a 30-year-normal basis.

Platts Analytics forecasts OPEC crude production to fall 870 MB/D in 2019, led by Iran (down 1,050 MB/D) and Venezuela (down 310 MB/D). Geopolitical disruptions reach a multi-decade high of 4.1 MMB/D; production risks still greater to the downside in Libya, Nigeria, and Iraq. Saudi fiscal breakeven estimated above $90/Bbl Brent in 2019; budget pressure will keep the focus on short-term revenue maximization. U.S. withdrawal from Syria raises the temperature in the Middle East, and marginally increases the odds of unexpected military conflicts. 2019 elections to watch are led by Nigeria, Turkey, and possibly Libya, which will raise geopolitical tensions and disruption risks. Populist politicians present risks to oil production growth in Argentina.

The S&P 500 gained almost 3% on the week and pushed well above the 2,600 level, as volatility fell. Oil had another solid week, as did the energy commodity complex. The St Louis financial stress indicator has been heading notably lower the last two weeks. Total commodities were higher by 2.2%. Our bellwether indicators, copper and aluminum, again held up well, while palladium remains exceedingly strong. The dollar strengthened by 0.8%, which was a bit of a counter move vs. the bullish move on commodities and equities. Implied inflation continues to move a bit higher. Many of the credit metrics continue to heal.

Global equities gained 2.1% on the week, with the U.S. S&P 500 higher by almost 3%. Among the domestic tracking indices, banking did the best, higher by 6.7%, while energy matched with a 3% gain. Utilities and housing declined slightly. Internationally, China was higher by 3.4% and did the best, while all the other tracking indices posted gains too.

Ethanol prices in Chicago reached a three-month high last Friday. D6 RIN values declined for the third consecutive week after a sharp rise following the 2019 mandate announcement in November. The manufacture of ethanol-blended gasoline plunged during the week ending January 4, which is common during the end-of-year holiday season. Ethanol prices in both Brazil and Europe fell. U.S. biodiesel prices increased, supported by rising heating oil prices and higher feedstock costs.

U.S. ethanol production increased sharply last week as most companies resumed normal operations following two consecutive holiday-shortened weeks. Output rose by 51 MB/D to 1,051 MB/D, rebounding from an eight-month low. Stocks increased by 97 thousand barrels to 23.4 million barrels. This was the sixth build over the past eight weeks. Ethanol-blended gasoline production rose by 475 MB/D to 8,548 MB/D, up only 0.4% from this time last year.

With the January, 2019 WASDE temporarily little more than an asterisk in the archives, the market is left to wonder what would have happened with a “normal” release. Unfazed by a potential drop in soybean yields for both Americas since no new data will be available for more than a week after the shutdown ends, if at all, the algos continue to feed off the failure to break the December 12th high of $9.28 despite three attempts. Traders will trade but producers need to make planting plans in fairly short order so the lost data may be more relevant to them should the delay stretch much longer.

Henry Hub cash rebounded to a seven-day average of $3.15/MMBtu the week-ended January 17, up 38 cents (14%) week-on-week as below-normal temperatures raised demand across the US to levels not seen since the bomb-cyclone weather event in early 2018.

Carbon and coal stopped their continued bearish trend on 8th Jan, stabilizing without moving the CSP anchor significantly. JKM keeps pointing to high LNG imports into Europe this summer and an absence of re-exports in Q1 19. Flows were left remarkably stable on the Continent last week. A reduction in UK demand led to more moderate IUK/Bbl flows and a redirection of Norwegian gas towards the Continent. The year-on-year storage surplus is left unchanged, which will provide a needed buffer in the coming cold days. Most NWE spreads to TTF moved up over the week as outright prices fell slower than in NL. Southern Europe and CEE gained most against TTF and SE spreads have reached record highs last week. Looking forward, the temperature forecast points to a tighter Germany, whilst still restricted French storages will test the country’s resilience despite a more moderate weather. In the UK, MRS is ready to deliver significant flexibility, although the market has already priced in high IUK and Bbl flows.

In the last scorecard, we focused on how pricing affects overall production. Of great importance is also how that volume will be distributed and what are prices saying. It will come as no surprise that Asian demand is weak, however, the extent of the seasonal weakness has not been matched in 4-years, which is an incredible reversal given how tight last summer and winter has been.

The balance of generation quotas for the operating fleet of German reactors is about 159TWh, insufficient to reach the planned end of life of each plant. Their actual need is close to 264TWh with the largest shortfall borne by E.ON. Unused quotas from closed reactors can cover the shortfall if used in full, but a dispute between E.ON and Vattenfall and little clarity around RWE’s strategy introduce the risk of early closures. The reactors potentially impacted are Grohnde, Brokdorf, Isar-2 and Neckarwestheim-2, or more than half of the operating capacity.

Price markers across Europe, South Africa and Australia surged last week. CIF ARA forward prices were supported by gains in the European energy complex due to the onset of colder-than-normal weather. FOB Richards Bay prices led the gains this week, particularly in the spot physical market, as near term demand in the Atlantic Basin and supply concerns in the Pacific Basin likely made buyers look to South Africa for incremental volumes. FOB Newcastle prices rose in both spot and forward trading on concerns over Chinese supply availability as safety inspections are expected to increase in the wake of last week’s mining accident.

LPG export demand strength continues to support propane drawdowns last week, while production was mostly flat week-over-week at 2.07 million b/d. Average production in January is up roughly 266,000 b/d year-over-year, which is likely helping inventories remain above five-year average levels. The EIA’s product supplied was 1.6 million b/d for the week ended January 11, while exports were reported to be 922,000 b/d. LPG arriving from the US Gulf Coast into Northwest Europe is expected to reach around 80,000 mt by the end of January, according to data from S&P Global Platts trade flow software cFlow and market sources. Those included two VLGCs, both of which have already arrived in Europe. That has represented a sharp drop from December, when roughly 140,000 mt of product was heard incoming from the US Gulf Coast, according to cFlow and market sources. Sources attributed the decline to narrowing netbacks to Europe and slow consumer demand, with product being pulled to Asia from the US Gulf Coast instead of to Europe. Front-month non-LST propane gained 0.375 cents/gal, or 1%, ending the week at 68.25 cents/gal.