PIRA Energy Group's Weekly Oil Market Recap for the Week Ending August 18th, 2013

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The China GDP Slowdown is Underway.

NYC-based PIRA Energy Group believes that the China GDP slowdown is underway. On the week, U.S. commercial stocks drew. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

*Difficult Transitions Underway

The China GDP slowdown is underway. It is still unclear whether the long-predicted transition to slower, domestic led growth will be successful and smooth. While this may represent a vulnerability to demand growth (for all fuels), the increasingly volatile political transition in MENA could prove to represent a far more important vulnerability to oil and gas supply growth. The shale revolution continues to spread from the natural gas supply to the demand side of the balance as new markets emerge to take advantage of the growth of low cost North American production.

*U.S. Stocks Drew Last Week

Total commercial stocks decreased for the week ending August 9, largely offsetting the modest builds seen in the prior two weeks. Products increased despite lower refinery runs and lower product imports due to weaker reported demand. Crude stocks drew, with Cushing crude stock draws accounting for half of the total draw. Cushing crude stocks are now down from the all-time high this year and at the lowest level since 1Q12. Despite this week’s decline, the stock excess to last year widened as there was a draw in this week last year.

*U.S. Sees Low Propane Stock Build

A surprisingly low stock build was indicated for the latest reporting week. The U.S. is experiencing a widening deficit to last year. The storage deficit relative to last season is expected to widen as the pace of exports picks up and with a likely favorable crop drying season ahead.

*EPA Finalizes 2013 Biofuel Standards and Will Reduce 2014 Mandates

U.S. ethanol prices and margins fell last week because of rising production, inventories and imports. Sharply lower RIN prices also put downside pressure on prices. The EPA finalized the renewable fuel standards for 2013 and stated that it will reduce the 2014 mandates in order for them to be achievable.

*Ethanol Stocks Draw; Production Higher

Ethanol stocks were drawn by 291 thousand barrels to 16.4 million barrels for the week ending August 9, erasing the build from the previous week. U.S. ethanol production rose for the second straight week, reaching 857 MB/D from 853 MB/D the prior week as several manufacturers maximized output prior to extended turnarounds planned for later this month and during September.

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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