PIRA Energy Group's Weekly Oil Market Recap for the Week Ending November 16th, 2014

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U.S. Oil Stock Excess Expands Slightly W/W

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As the primary beneficiary, along with the two other core OPEC countries, Kuwait and UAE, of OPEC (and non-OPEC) outages since 2010, other OPEC members will expect Saudi Arabia to sacrifice volume in the current oversupply situation.

NYC-based PIRA Energy Group Reports that U.S. total commercial oil stocks drew the week ending November 7, slightly widening the commercial stock surplus. On the week, Japanese crude runs rose and crude imports declined, causing crude stocks to draw. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

Stock Excess Expands Slightly W/W

U.S. total commercial stocks drew the week ending November 7. The draw fell short compared to last year, slightly widening the commercial stock surplus. Within the overall draw, another week of very low crude imports drove an unexpected crude stock draw, pushing crude stocks into a deficit versus 2013 levels. The four major refined products drew year-on-year, narrowing their deficit.

Crude Imports in Japan Decline W/W

Japanese crude runs rose and crude imports declined the week ending November 8, causing crude stocks to draw. Finished product stocks built, with most of the build in kerosene. Gasoline demand was relatively strong, the yield fell back and stocks drew. Gasoil demand was again fractionally changed, as were stocks. Kerosene demand fell and the yield was higher so consequently stocks built on the week.

OPEC Meets November 27

Saudi Arabia will be in an uncomfortable position at the upcoming November 27 meeting in Vienna. As the primary beneficiary, along with the two other core OPEC countries, Kuwait and UAE, of OPEC (and non-OPEC) outages since 2010, other OPEC members will expect Saudi Arabia to sacrifice volume in the current oversupply situation.

Creeping Stock Surplus Continues

The preliminary October stock data for the three major OECD markets are in and they show a commercial stock draw of just 2 million barrels versus a stock decline of 31 million barrels in the same month last year. The nearly 1 MMB/D swing in the change in inventories is evidence of the ongoing 1.0-1.5 MMB/D supply surplus relative to demand in 2014.

Weak Naphtha Hampers LPG Demand

LPG remains stuck in strong competition with naphtha in Europe. Propane declined in lockstep with the refined product, losing 4% last week. Butane performed better bust still lost 2%, settling Friday at $505/MT. Butane weakness in Europe has the product’s cracking margin soaring. At 48¢/lb, butane is a full ten cents higher than other feedstocks. Naphtha margins improved some, and now look about equivalent with propane in the region. Propane remains relatively expensive, and thus any increase in petrochemical demand will necessitate a widening of LPG’s discount to naphtha in both Europe and Asia.

U.S. Ethanol Prices Soar W/W

Ethanol prices jumped again the week ending November 7 as inventories and production during the prior week were lower than expected. This resulted in a short squeeze since many traders had counted on values to decline.

U.S. Ethanol Output and Stocks Increase W/W

Ethanol production rose to 946 MB/D the week ending November 7, up from 929 MB/D during the preceding week as more corn has come available from the new harvest. Inventories built for the second consecutive week, reaching 17.7 million barrels.

Political Risk Scorecard

Progress in the Kurdish negotiations but continued instability in Libya this 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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