PIRA Energy Group's Weekly Oil Market Recap for the Week Ending May 4th, 2014

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Physical Markets Are Recovering

PIRA's economic growth forecast is on track. markets are recovering, especially in the Atlantic Basin, supported by relatively low stocks and higher crude run demand...

NYC-based PIRA Energy Group believes that the physical markets are recovering. In the U.S., commercial stocks continue to March higher. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

Physical Markets Are Recovering

PIRA's economic growth forecast is on track. Market positioning is more of a concern for next month's prices than seasonality. Physical markets are recovering, especially in the Atlantic Basin, supported by relatively low stocks and higher crude run demand. As expected, low inventories have strongly kicked off the gasoline season, but with higher crude runs gasoline stocks will build back towards more typical levels. Diesel tightness will ease over the next few months, but stocks will stay generally low all year.

European Oil Market Forecast

Atlantic Basin crude supply growth in light grades supports continued relative strength in Urals differentials hurting refining margins for medium-sour grades. Light product exports from Russia will increase and VGO/straight run resid exports will decline, this year and next. Refining margins in Europe will remain challenged this year with marginal FCC/visbreaking capacity modestly attractive through midyear but then weaker in the 4th quarter. Gasoline cracks will peak early as stocks will build back quickly over the next few months. Distillate inventories will remain low and prices will strengthen further as demand picks up after midyear.

U.S. February 2014 DOE Monthly Revisions

DOE released its final monthly February 2014 (PSM) U.S. oil supply/demand data today. Demand came in at 18.99 MMB/D versus the 18.77 MMB/D PIRA had assumed in its balances. Compared with the weekly preliminary data, total demand was revised higher by a large 538 MB/D, with distillate demand revised higher by 601 MB/D, and gasoline higher by 226 MB/D. This is because of much lower exports than the DOE was assuming. End-February total commercial stocks stood at 1,047 MMBbls, nearly identical to PIRA's projection.

The Freefall in Ethanol Prices paused at the end of April

U.S. ethanol prices declined sharply during most of April as the weather in the Midwest improved and the gridlock in the rail system eased. The last few days of the month, prices stabilized as some companies needed to purchase ethanol to meet April supply commitments.

Ethanol Stocks Build

Ethanol inventories built to the highest level since July 2013 the week ending April 25, rising by 694 thousand barrels to 17.2 million barrels. Ethanol production fell to 898 MB/D from 910 MB/D during the preceding week.

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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What will determine the volume of U.S. product exports? Where are the most likely markets for these exports? What impact will this have on refining economics and operations elsewhere in the Atlantic Basin? Click to view PIRA’s new multi client study: Shale Crude’s Growing Global Impact: Consequences for Trade Flows and Pricing Within and Beyond North America’s Borders

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