PIRA Energy Group's Weekly Oil Market Recap for the Week Ending April 28, 2013

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Markets Looking Beyond Growth Slowdown

PIRA Energy Group

PIRA Energy Group

Currently weak oil prices can be traced to both the growth slowdown and extremely low levels of financial net length in oil futures.

NYC-based PIRA Energy Group reports believes weak oil prices can be traced to both the growth slowdown and extremely low levels of financial net length in oil futures. On the week, U.S. oil inventories declined, while Japanese crude stocks drew. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

*Markets Looking Beyond Growth Slowdown

Currently weak oil prices can be traced to both the growth slowdown and extremely low levels of financial net length in oil futures. Highly expansionary monetary policy should lead to stronger economic growth later this quarter. Tighter balances, especially for global crude oil, are just a month away and the Middle East is on fire. Gasoline cracks will be relatively strong to mid-year followed by gasoil/diesel in the second half of the year.

*U.S. Inventories Decline For the First Time in Three Weeks

After two consecutive weeks of stock builds, overall U.S. commercial oil inventories declined the week ending April 19, as a product stock decline outpaced a modest crude inventory increase. For the same week last year stocks were essentially flat resulting in the overall year-on-year inventory excess to narrow. The entire excess is in crude, primarily reflecting new infrastructure investments, while overall product stocks are flat.

*Japanese Crude Imports Ease, Drawing Stocks While Runs Rise

Japanese crude runs rose but crude imports backed off sufficiently resulting in a crude stock draw. Gasoline and gasoil demands eased, however, a big pickup in gasoil exports allowed for a small stock draw, while gasoline stocks built slightly. Kerosene yield eased seasonally, although a very low yield produced one last stock draw. Refining margins remain weak, but improved slightly.

*High Exports Benefit U.S Propane Prices

U.S. propane values benefit from far lower inventory than last season largely attributed to a quite high level of exports, extensive feedstock usage as well as relatively colder weather. Ethane values remain at around rejection levels especially in the mid-continent. European and Asian LPG values pushed lower by end of heating season demand and weakening naphtha values. Chemical feedstocks usage will be gaining and provide an outlet for increasing supplies from the USGC and West Africa. Not much incentive for storage plays yet.

*U.S. Ethanol Production Increases

U.S. ethanol production rebounded to 853 MB/D the week ending April 26, nearly reaching the ten-month high of 854 MB/D set two weeks earlier. Inventories rose by 85 thousand barrels to 17.6 million barrels. The U.S. imported 39 MB/D (11.5 million gallons) of Brazilian sugarcane-based ethanol, following two weeks when no imports were reported.

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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