New York, NY (PRWEB) January 23, 2013
NYC-based PIRA Energy Group believes declining U.S. imports will negatively affect Atlantic Basin crude balances. On the week, U.S. oil stocks built, while Japanese crude stocks drew. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:
*Declining U.S. Imports Will Negatively Affect Atlantic Basin Crude Balances
North American production is growing rapidly, and U.S. offshore imports will continue to decline. This will negatively affect Atlantic Basin crude supply-demand balances. WTI-Brent will narrow steadily in 1Q13 and then more sharply midyear as Cushing inventories are drained. U.S. Gulf Coast light crude differentials will be choppy, but will remain connected with limited discounts versus international levels.
*Asian Product Stocks Should Build in January
Oil prices have continued to trade in a relatively tight range. Asian crude runs will decline in January, but demand declines for gasoline, gasoil, and fuel oil will outpace run declines. This suggests Asian product stocks will build.
*U.S. Stocks Build Week-on-Week
U.S. commercial oil inventories built the week ending January 11. The build was lower than the prior week’s build due to the combination of lower crude and product imports, lower runs, and slightly higher demand.
*Japanese Crude Stocks Draw Week-on-Week
For the week ending January 12, Japanese crude stocks drew, which largely offset a large upward revision in the prior week’s crude stock levels. The data remain highly constructive and product cracks have performed accordingly.
*Commodity Investment Stagnating as Incentives Weaken
Post-2004, oil, as well as other commodities, acquired the traits of financial assets. With strong returns and a tendency to be negatively correlated to other traditional assets, institutional investors advocated for including commodities in financial portfolios. However, as commodities became a financial asset, this resulted in a decline in the ability of commodities to diversify portfolios. Institutional investors are now scaling back exposure to commodities.
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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