PIRA Energy Group's Weekly Oil Market Recap for the Week Ending March 31, 2013

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Growth Scare Becoming Less Threatening

PIRA Energy Group

PIRA Energy Group

PIRA Energy Group believes that growth scare is becoming less threatening as economic data are improving and markets become reassured.

NYC-based PIRA Energy Group believes that growth scare is becoming less threatening as economic data are improving and markets become reassured. On the week, U.S. oil commercial stocks fell for the seventh consecutive week. In Japan, crude runs dropped as turnarounds begin to gear up. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

*Growth Scare Becoming Less Threatening

A growth scare along with a swoon in risk assets is becoming less threatening as economic data are generally improving and markets become reassured by the backstops put in place by governments. Brent crude prices will ultimately break out of their current trading range to the upside. WTI will continue to outperform Brent and summertime WTI backwardation could surprise to the upside. Gasoline cracks will be relatively strong and middle distillates will gain strength in 2H13.

*Seventh Consecutive Weekly Stock Decline

Overall U.S. commercial inventories fell the week ending March 22 as products stocks decreased while crude stocks built. Over the past seven weeks overall inventories have declined, compared to an increase the year before. The year-on-year stock excess has now narrowed and virtually the entire excess can be accounted for by additional crude oil infrastructure compared to the year earlier.

*Japanese Crude Runs Continue Dropping, Crude Stocks Build

Japanese crude runs dropped as turnarounds begin to gear up, and the crude import rate produced a stock build the week ending March 23. Gasoil stocks built slightly, while gasoline stocks eased fractionally. Margins continued to ease with all cracks moving lower. Kerosene stocks continued to decline despite falling seasonal demand.

*U.S. Ethanol Prices Plummet

U.S. ethanol prices plummeted last week following two bearish corn reports and are expected to fall during the remainder of the year, following lower corn costs. Mills in the South-Central region of Brazil commenced crushing before the typical April start to the harvest. Brazil’s ethanol output is forecast to increase in 2013, compared to 2012.

*LPG Weekly Scorecard

In the U.S., extended winter like conditions in much of the country as well as chemical feed usage and exports have helped to sharply reduce propane storage levels. Ethane consumption should also be gaining, helping to draw excessive inventory positions. Winter continues in Europe and has largely ended in Asia. Chemical feed usage is certainly expected to remain relatively strong and provide an LPG outlet. Backwardated prices will delay the seasonal storage play.

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) 542- 1677
info(at)pira(dot)com

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