PIRA Energy Group's Weekly Oil Market Recap for the Week Ending April 20th, 2014

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U.S. Commercial Oil Stocks Build W/W

PIRA Energy Group

PIRA Energy Group

Commercial oil inventories built 14.5 million barrel the week ending April 11, the largest weekly increase since 2009.

NYC-based PIRA Energy Group reports that on the week, U.S. commercial oil stocks built; the largest increase since 2009. Japanese crude stocks also built, while demand is still impaired. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

Commercial Oil Inventories Build W/W

Commercial oil inventories built 14.5 million barrel the week ending April 11, the largest weekly increase since 2009. Crude stocks gained 10 million barrels, the largest increase in over five years, with the SPR contributing just 0.6 million barrels to the increase. Crude stocks have now moved above 2013 levels for the first time this year, while all the main product categories are below last year.

Japanese Stocks Build, Demands Still Impaired

In Japan, total commercial stocks rose 4.6 MMBbls for the second straight week. Crude stocks built 2.7 MMBbls with finished products rising 1.5 MMBbls. All the major product stocks built, with the exception of naphtha. There is still demand impairment from the April 1st consumption tax increase, although the impact should soon begin to diminish. The indicative refining margin was modestly higher and margins remain good.

February Census Exports Clarify February U.S. Product Demand & Crude

The month-on-month decline in distillate and gasoline exports for February, 2014, as well as the EIA’s export plug used during the weeks of February, resulted in upward revisions to calculated February U.S. product demand. For distillate, February exports point to an upward demand revision close to what one would expect with the colder weather. For gasoline, February exports imply an added 190 MB/D to the demand rates reported in the weekly. Some of this demand growth could be a function of declining efficiency. On the crude oil side, exports of 240 MB/D during February reflected a continuation of the recent high level of crude exports to Canada.

Weaker Price Environment to Benefit Vessel Operators

PIRA expects a weaker price environment over the next five years will prove beneficial to vessel operators by reducing bunker costs from current levels. The flat prices for crude and products over the past several years have been stable as positive supply news from rapidly rising shale production has been nearly offset by continued supply disruptions both from OPEC and non-OPEC nations. Risks still remain to Iraqi, Libyan and Venezuelan crude supplies.

Rising Freight Rates To Alter Trade Flow

The shoulder season is seeing anticipated U.S. propane stock builds. Exports are active, but sharply rising freight rates will lead to some trade flow shifts in the weeks ahead. Ethane usage is being impacted by a relatively high level of cracker downtime. Overseas markets are seeing more LPG feed usage.

Ethanol Output Jumps W/W

U.S. ethanol production soared to an eighteen-week high 939 MB/D the week ending April 11 from 896 MB/D during the preceding week. This was the second highest output since January 2012 as the industry is finally breaking free of the frigid weather and logistical problems that have hampered operations over the past few months.

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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