PIRA Energy Group's Weekly Energy Market Recap

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U.S. Experiences Strong Oil Demand and Another Big Weekly Stock Draw

PIRA Energy Group
U.S. commercial inventories declined the week ending November 16, as strong product demand pulled product stocks lower and crude stocks drew for only the second time in seven weeks.

NYC-based PIRA Energy Group reports that the U.S. experienced strong oil demand and another big week-on-week stock draw. In Japan, crude stocks drew week-on-week. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following dynamics:

-U.S. Experiences Strong Demand and Another Big Week on Week Stock Draw.
U.S. commercial inventories declined the week ending November 16, as strong product demand pulled product stocks lower and crude stocks drew for only the second time in seven weeks. Looking forward, the refinery maintenance season is drawing to a close and refinery margins should support higher runs.

-Japanese Crude Stocks Draw Week on Week.
Crude stocks drew the week ending November 17, as the implied crude import rate moved even lower. Crude stocks have declined the past two weeks and are now just above the four-year low. PIRA’s tanker fixture data from the Middle East to Japan have risen significantly and portend a sharp rebound in the implied crude import rate.

-Winter Rally in Tanker Rates Brightens Dismal Year for Operators.
A winter rally in rates for VLCCs and product tankers has brightened an otherwise dismal year for tanker operators. The decline in bunker prices due to the fall in flat crude prices, as well as a steep contraction in fuel oil spreads, helped improve operating margins across the size spectrum. Fleet rationalization measures are accelerating, including a slowdown in tanker orders and early scrapping of surplus tonnage. However, deliveries of tankers ordered before the current slump continue to erode prospects for any return to a more reasonable balance between supply and demand in the near term.

-U.S. EPA Denies Request to Waive RFS.
The EPA denied requests to waive the Renewable Fuel Standard for corn-based ethanol in 2012 and 2013, maintaining that there is no indication the regulation itself causes severe economic harm. While widely anticipated, the denial removes some uncertainty from the marketplace. Coupled with the drop of inventory to the lowest level of the year, and Brazilian mills closing during the inter-harvest period, industry profitability is beginning to bounce off extremely low levels. U.S. ethanol prices were mostly lower the week ending November 16, with prices in Chicago, New York and the Gulf Coast falling.

-U.S. Ethanol Production Declines Week on Week.
In the week ending November 16, U.S. ethanol production declined for the second consecutive week, falling to 811 MB/D from 824 MB/D during the prior week. The U.S. received only 6 MB/D (1.8 million gallons) of Brazilian sugarcane-based ethanol, down from 59 MB/D (17.3 million gallons) the previous week, as mills in Brazil’s South-Central region are shutting down for the inter-harvest season. Despite declines in both ethanol output and imports, stocks built by 1.1 million barrels to 18.9 million barrels. Inventories had been at the lowest level of the year the previous week. The manufacture of ethanol-blended gasoline fell slightly to 8.18 MMB/D from 8.22 MMB/D.

The information above is part of PIRA Energy Group's weekly Energy Market Recap, which alerts readers to PIRA’s current analysis of energy markets around the world as well as the key economic and political factors driving those markets.

Click here For Additional Information on PIRA’s global energy commodity market research services.

PIRA Energy Group
3 Park Avenue, 26th Floor
New York, NY 10016
212-686-6808
jsteele(at)pira(dot)com

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