PIRA Energy Group's Weekly Oil Market Recap for the Week April 26th, 2015

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The Vast Majority of the Bearish News Is Already Out and That the Price Lows for Global Crude Oil Markers Are In

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PIRA believes that vast majority of the bearish news is already out and that the price lows for global crude oil markers are in.

NYC-based PIRA Energy Group believes that the vast majority of the bearish news is already out and that the price lows for global crude oil markers are in. In the U.S., stocks build but surplus to last year narrows. In Japan, crude and finished product stocks build, amid higher demands. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

Asia-Pacific Oil Market Forecast

PIRA believes that vast majority of the bearish news is already out and that the price lows for global crude oil markers are in. The current trajectory to crude stocks peaks in May, and then draws commence June-August. Supply disruptions, while having come off in March, will remain high for the foreseeable future. Any final deal with Iran will not result in significantly higher volumes until much later in 2015 at the earliest. Meanwhile, Saudi Arabia’s production is making new historic highs and the Kingdom is raising prices to Asian customers. The magic of price is working to tighten oil markets and higher oil prices are in the offing. PIRA has once again revised its 2015 crude oil price outlook higher.

U.S. Stocks Build but Surplus to Last Year Narrows

The United States had another hefty stock build this past week. Last year’s overall build in the same week was even larger leaving the year-on-year inventory excess modestly down. Over half of the year-on-year increase is in crude oil, while the bulk of the rest is in other products. Gasoline and distillate stocks are each 15-17 million barrels above last year, but since gasoline inventories are nearly double those of distillate the year on year excess is a smaller 7%.

Build, Amid Higher Demands

Crude runs increased slightly and crude imports rose such that stocks built. Finished product stocks also built. Gasoline and gasoil demands were higher, but with a slight stock build for gasoline and a more significant stock build for gasoil. Kerosene demand rose and stocks drew 30 MB/D, similar to the rate drawn in the previous week. The indicative refining margin eased on the week but still remains statistically strong.

Freight Market Outlook

Thus far in 2015 spot tanker markets have eluded the seasonal decline generally experienced during the second quarter of the year. Firm spot tanker rates helped by rising OPEC output and cheap bunkers combined to propel first-quarter vessel earnings to their best showing since 2008, and this momentum has continued in April. Although floating storage has not yet materialized to any significant degree, a current overhang of West African crude could produce some floating stocks.

High U.S. LPG Stocks to Keep Building

Propane inventories continue to climb in the offseason, with stocks adding 1.99 million barrels in the latest week, matching the previous week’s build. Propane inventories are currently 57.5 MMB, 31 million barrels higher than a year ago. Inventories of other NGLs and LRGs (excluding propane) increased by 2.7 million barrels last week, climbing to the 85.2 MMB level. The surplus to a year ago expanded to 12.6 MMB.

Ethanol Prices Rise

U.S. ethanol prices gained the week ending April 17 as petroleum values surged. Demand was strong as blenders prepare for the peak driving season.

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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