Tighter global oil markets will send third quarter crude oil prices into a new, higher trading range for Brent. Low inventories and increased global supply disruptions have supported prices despite a larger than expected second quarter stock build.
New York, NY (PRWEB) May 28, 2014
NYC-based PIRA Energy Group believes that U.S. economy is ready to anchor stronger global growth. On the week, U.S. stock build substantially moderates. In Japan, crude runs continue easing, with finished product stocks continuing to build. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:
U.S. Economy Is Ready to Anchor Stronger Global Growth
Tighter global oil markets will send third quarter crude oil prices into a new, higher trading range for Brent. Low inventories and increased global supply disruptions have supported prices despite a larger than expected second quarter stock build. Political risks to supply have turned bullish for the summer. Limits to Saudi Arabia’s volume cuts are key to the lower 2015 price outlook.
1Q14 Tight Oil Operator Review
Four themes emerged in the first quarter results. First, operators indicated that 2014 production would be weighted to the second half of the year as harsh winter weather continued well into 1Q14. Second, in the Permian, drilling activity increased rapidly despite the weather, resulting in some service cost inflation. Third, in Bakken and Eagle Ford, operators are still focused on increasing acreage productivity, with emphasis on downspacing and completion designs. Finally, a number of operators divided their attention between the three big plays and emerging plays.
Bullish for U.S. Prices
June Saudi loading delays and reduced operational tolerances should continue to be bullish for US prices. Lower freight rates have opened the arb to Europe and Asia encouraging increased exports. Continuing stock builds should erode the year-on-year deficit in US LPG stocks.
U.S. Ethanol Prices Rise
Ethanol prices jumped near the end of the week ending May 16 as the market in the Midwest tightened. Manufacture of ethanol-blended gasoline reached an all-time high, while PADD II stocks fell to the lowest level of the year.
U.S. Ethanol Inventories Decline
U.S. ethanol production rose again the week ending May 16, reaching 925 MB/D for the only the second time this year. Total U.S. inventories, however, were drawn by 312 thousand barrels to a four-week low 16.99 million barrels.
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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