PIRA Energy Group's Weekly Oil Market Recap for the Week Ending May 5th, 2013

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U.S. Crude Stocks Build Week-on-Week

PIRA Energy Group

PIRA Energy Group

Overall U.S. commercial stocks had the largest increase of the year during the week ending April 26.

NYC-based PIRA Energy Group reports that U.S. commercial oil stocks had the largest increase of the year for the week ending April 26. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

*Largest Stock Build of the Year

Overall U.S. commercial stocks had the largest increase of the year during the week ending April 26. The crude stock build was largely related to the surge in imports, the second largest weekly import figure this year. Not surprisingly, the total stock build was much larger than the build in 2012, widening the year-on-year stock excess. The reported demand was still weak even after adjusting for normal weather and actual exports (versus DOE assumed levels).

*Comparison of PIRA and USGS Bakken-Three Forks Shale Oil Resource Estimates

The USGS has released a new crude oil assessment of the Bakken-Three Forks shale formation with a mean estimate of 7.4 billion barrels (BBbl). PIRA has reviewed the USGS assessment and believes that their mean estimate is too low. The USGS has applied large average well spacing and low average well production assumptions, which do not correspond to what is currently occurring in the Bakken-Three Forks formations.

*No Easy Way to Fix Pipeline Logjam in Canada

For more than two years Western Canada’s land-locked oil producers have faced discounts on their barrels sold in the oversupplied U.S. mid-continental market. Diversifying oil exports from the U.S. to the growing Asian markets is a priority, but all existing pipeline proposals face a slow moving regulatory process. Timing is a very important issue since at some point, the uncertainty and reduced producers’ revenue could begin to affect the pace of oil sands development.

*Atypical U.S. Propane Stock Build

The last full week of April was the first week this month to experience a significant U.S. propane stock build – a rather atypical development attributed to high levels of exports, on-going feedstock usage as well as the colder than normal April weather that had led to a net stock draw for the prior weeks in April. Last week also saw some other key developments including the highest level of imports in several weeks as well as a steep drop in apparent demand, just as the heating season is finally winding down.

*U.S. Ethanol Production Reached 10-Month High

U.S. ethanol production reached a 10-month high of 857 MB/D the week ending April 26, as manufacturing margins improved. Inventories declined to about 17.0 million barrels, the lowest level since November 2011. As a result, June ethanol futures prices increased 1.4¢ to $2.459 per gallon.

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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