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

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U.S. Stocks Build but Excess Modestly Narrows, while Japanese Crude Runs Decline Due to Typhoons

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Overall commercial stocks built 2.9 million barrels, 2.3 million barrels less than last year’s increase for the same week, narrowing the year-on-year stock excess to a still hefty 144.4 million barrels, or 12.8%.

NYC-based PIRA Energy Group reports overall commercial stocks built but the excess modestly narrowed. In Japan, crude runs declined due to typhoons and crude stocks drew on low imports. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

U.S. Stocks Build but Excess Modestly Narrows

Overall commercial stocks built 2.9 million barrels, 2.3 million barrels less than last year’s increase for the same week, narrowing the year-on-year stock excess to a still hefty 144.4 million barrels, or 12.8%. The crude stock surplus to last year widened to 93 million barrels, or 25%. Cushing crude stocks are 39 million barrels over last year, a new high for the year.

Japanese Crude Runs Decline Due to Typhoons, Crude Stocks Draw on Low Imports

Crude runs declined due to the impacts from a typhoon, which also kept crude imports very low such that crude stocks posted a large draw. Finished product stocks rose due to a build in jet-kero and fuel oil. Gasoline demand was higher from holiday impacts and stocks drew. Gasoil demand was also higher, producing a modest stock draw. The indicative refining margin remained good and was little changed.

Gas Tanker Rates Falling

Spot VLGC tanker rates look to have peaked with the benchmark Ras Tanura to Chiba, Japan rate falling $20 to $120/MT after reaching the year’s highest levels a week ago. LPG length in the AG has led to suppliers leaning on term purchasers to lift contracted volumes, which squeezed an already extended gas tanker market. Supply in Asia, set to benefit from additional AG deliveries, has reacted to crimp spot arbs from the U.S. by the most in a year – which may very well lead to an increase in spot VLGC availabilities – and thus the peak may now be in for tanker rates. With new build tanker deliveries accelerating from here thru next year – rates may not return to these levels for some time.

Ethanol Prices Decline

The week ending July 17, U.S. ethanol prices tumbled to the lowest level in almost a month, tracking the decline in corn and oil values. The six-week low output of ethanol-blended gasoline during the preceding week was also bearish.

U.S. Ethanol Output Lower

Ethanol production fell for the second consecutive week as some plants have been operating at lower rates due to poor margins. Inventories dropped by 181 thousand barrels to 19.6 million barrels, though PADD III was the only region where stocks decreased.

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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