PIRA Energy Group's Weekly Oil Market Recap for the Week Ending December 15th, 2013

A large part of Libya's potential return has been priced in to oil markets.

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PIRA Energy Group

PIRA Energy Group

It is tough to judge whether Libya will restart exports this Sunday or whether this will be another false start. Signs are more encouraging this time with local tribal leadership seemingly behind the restart.

New York, NY (PRWEB) December 17, 2013

NYC-based PIRA Energy Group believes that a large part of Libya's potential return has been priced in to oil markets. The U.S. largest crude stock draw of the year pulls overall inventories lower. In Japan, runs rise, crude stocks build strongly. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

A Large Part of Libya's Potential Return Has Been Priced In

It is tough to judge whether Libya will restart exports this Sunday or whether this will be another false start. Signs are more encouraging this time with local tribal leadership seemingly behind the restart. Oil markets have already priced in a return, with Brent prices declining from a recent peak of almost $113/Bbl to a near $109/Bbl close today. Suppose Libya does return, how much more downside is in store? There is little doubt that if Libya does restart exports on Sunday prices will be down substantially during the course of Monday, but will they stay down? PIRA thinks not, at least for the period immediately ahead.

Largest Crude Stock Draw of the Year Pulls Overall Inventories Lower

Crude stocks fell this past week as refiners continued to run at summer peak levels to take advantage of attractive margins. The crude stock decline was also aided by frigid weather which reduced domestic crude production. The weather also reduced product demand, and combined with high runs caused the first product stock build in thirteen weeks. The overall stock decline expanded the stock deficit to last year by over ten million barrels.

Japanese Runs Rise, Crude Stocks Build Strongly

Runs continued rising post-turnaround but crude imports moved higher resulting in a strong crude stock build. Gasoline demand remained strong and gasoil demand grew to an extremely high level with a stock draw on both gasoline and gasoil. The yield on kerosene dropped from the previous week's extremely high level, resulting in a slight stock draw. Refinery margins increased on the week.

Tight Propane Markets in the U.S.

U.S. propane storage is expected to end the year at well over ten year lows. Stocks are being pulled lower by exports, modest petchem feed usage and the coldest weather in years. Ethane and butane are the preferred steam cracker feedstocks. International LPG markets are awaiting the arrival of imports from the U.S. and West Africa.

U.S. Ethanol Prices and Margins Rebound

After falling from a two-year high on November 22, U.S. ethanol prices and margins rebounded the week ending December 6 as production did not increase as many had anticipated and the small stock build was not enough to relieve tightness in the market. The premium of New York to Chicago ethanol prices grew to a seven-year high as PADD I inventories dropped to the lowest level since the EIA began reporting weekly supply data in June 2010.

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.

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