PIRA Energy Group's Weekly Oil Market Recap for the Week Ending December 29th, 2013

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World Economy Is Set for Faster Growth

PIRA Energy Group

PIRA Energy Group

The world economy is set for faster growth now that it has achieved escape velocity. Current low oil inventories and stock declines are supporting strong prices.

NYC-based PIRA Energy Group believes that world economy is set for faster growth. In the U.S. there is another large stock decline, while in Japan, crude stocks draw strongly. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

World Economy Is Set for Faster Growth

The world economy is set for faster growth now that it has achieved escape velocity. Current low oil inventories and stock declines are supporting strong prices. Key light product inventories are low, with distillate vulnerable to a spike with very cold weather. Brent-Dubai will be fairly wide in January and February before narrowing sharply in April. Political risks were muted in December, but are still very much present.

Another Large U.S. Stock Decline

Inventories fell this past week, slightly surpassing the week earlier decline, and bringing the total decline to over 70 million barrels over the last nine weeks, the largest decline for this period since 1999. Inventories are now 3.6% below year ago levels, with stock deficits in all of the major categories. PIRA's demand adjusted to normalize year-on-year weather and to reflect actual versus DOE-assumed exports, is running 8.1% above year ago levels.

Japan Crude Stocks Draw Strongly

Runs rose slightly on the week, but another big drop in implied crude imports allowed crude stocks to decline. It was the second large stock draw in two weeks. All the product demands rose on the week. Gasoline demand was pushed higher by the Emperor's birthday holiday, but gasoil demand was also strong. Product stocks, except for naphtha, drew in varying degrees. Gasoil stocks drew to another new record low. Kerosene demand was strong, as winter weather is kicking in and again drawing stocks.

Northern Gateway Pipeline Receives Conditional Approval

Canada’s National Energy Board’s 3-member Joint Review Panel gave a conditional approval to the Northern Gateway pipeline that would carry 525 MB/D of oil sands bitumen from Alberta to Kitimat, B.C. for tanker shipments to Asia. This Cdn$7.9 billion project has been described as a strategic, true nation-building investment, since it would open new Asian markets for growing Canadian crude and bitumen production. However, because of geography and the long-unresolved native land claims, the Northern Gateway has been a political minefield since the beginning.

VMT and Trucking Trends in the U.S. Are Again Upbeat

The Federal Highway Administration just recently released vehicle miles traveled (VMT) data for October, while the American Trucking Association released its Truck Tonnage Index for November. Both indicators confirm accelerating growth in on-road transport fuels, both gasoline and diesel.

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
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New York, NY 10016

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