PIRA Energy Group's Weekly Oil Market Recap for the Week Ending November 24th, 2013

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Old North American Crude Oil Pipelines Not the Reason for Major Pipeline Spills

NYC-based PIRA Energy Group reports that old North American crude oil pipelines not the reason for major pipeline spills. On the week, there was another massive U.S. product inventory decline. In, Japan, runs continue rising, with lower crude stocks. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

Old North American Crude Oil Pipelines Not Reason for Major Pipeline Spills

54% of major onshore crude oil pipelines in the U.S. and Canada were built before 1970, prior to the introduction of improved welding technology. Although this implies that the system may be vulnerable to pipeline spills/ruptures, pipeline integrity management by operators/trade associations has been an important factor in mitigating potential issues. For the 15 major crude oil spills over the past five years associated with “time-dependent” factors (i.e., material and/or weld failures and corrosion), only nine of these (60%) occurred in pipe identified as built before 1970, so there appears to be no age bias associated with major pipeline spills.

Another Massive U.S. Product Inventory Decline

Overall commercial oil product inventories in the United States fell by the largest weekly decline in two years for the week ending November 15. It was the 10th consecutive weekly stock draw. Crude inventories were relatively unchanged last week, with draws in PADD III essentially offset by builds in PADDs II and V. Total commercial oil stocks were down last week, the fourth monthly decline in a row. Total product stocks are now lower than last year and lower than the five-year average.

Japanese Runs Continue Rising, with Lower Crude Stocks

Runs continued rising post-turnaround and crude imports edged lower such that crude stocks drew. Both gasoline and gasoil demands were modestly higher, but there was a more significant rise in yields from low levels such that stock levels of both products rose. Gasoline demand remains noticeably weak. Kerosene demand was strong and stocks resumed drawing. Refinery margins moved slightly higher.

Tight LPG Markets

U.S. propane continues to outperform other components of the NGL complex. Stocks will continue to be drawn down sharply as exports, petchem feed demand and the pull for winter needs all contribute to demand. Incremental LPG supply is difficult to obtain in the Eastern Hemisphere as prices are being bid up sharply as both Europe and East of Suez markets compete for product just as winter conditions are taking hold.

EPA Plans to Slash Biofuel Requirements

The EPA proposed to reduce the total renewable fuel mandate for 2014 to 15.21 billion ethanol-equivalent gallons. If implemented, the requirement would be less than the 18.15 billion specified in RFS2 and the 16.55 billion mandate currently in effect for 2013.

U.S. Ethanol Output Declines

U.S. ethanol production remained over 900 MB/D for the fourth consecutive week, despite dropping to 904 MB/D from an annual high of 927 MB/D during the preceding week. Inventories declined by 70 thousand barrels to a still low 15.1 million barrels as the market is severely backwardated and companies are not holding stocks.

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
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New York, NY 10016

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