PIRA Energy Group's Weekly Oil Market Recap for The Week Ending June 16th, 2013

Weak economic conditions affect airline travel.

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PIRA Energy Group

PIRA Energy Group

PIRA’s findings show that a conventional model of enplanements based on disposable personal income, population and ticket prices adequately explains the number of people traveling by plane since the start of the latest economic slowdown.

New York, NY (PRWEB) June 18, 2013

NYC-based PIRA Energy Group believes that weak economic conditions affect airline travel. On the week, U.S. crude commercial stocks posted a large build. In Japan, there was a large crude stock build, but products drew. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

*How Weak Economic Conditions Affect Airline Travel

PIRA’s findings show that a conventional model of enplanements based on disposable personal income, population and ticket prices adequately explains the number of people traveling by plane since the start of the latest economic slowdown. The same cannot be said for the average distance traveled by these passengers. Higher unemployment levels will cause airline travelers to seek out alternatives to short haul flights and to a smaller extent they will reduce the propensity to spend on longer trips. These findings are important because they suggest — at least as far as air travel is concerned — that behavioral changes, rather than people-centric structural changes, are at work in airline travel.

*U.S. Crude Commercial Stocks Post Large Build

Total commercial inventories built for the week ending June 7 and the year-over-year excess widened. Statistical occurrences such as rebenchmarking may have contributed to this week's increase. Crude stocks, buoyed by what may be a record high balance item, increased unexpectedly during the week, and the year-over-year excess widened. The four major refined products built and their surplus versus last year increased.

*Japanese Large Crude Stock Build, but Products Draw

Crude stocks built sharply as imports surged. Runs were marginally lower. Stock draws were posted for gasoline, gasoil and fuel oil. Kerosene demand was very low, as was its yield from crude, such that the build rate was limited. Refinery margins, in dollar terms, continued to post gains as all the product cracks firmed on the week. Margins are considered good, at least in dollar terms.

*Substantial Growth in U.S. LPG Stocks

There was a very substantial growth in U.S. stocks for the latest reporting week. Overall, inventories added for propane after accounting for a decline in propylene storage. This is a rather uniquely high gain. Likely the data are in error, which the DOE will have to sort out. Overseas markets gained this week as buyers came into the European market and there was an inability to procure desired levels of prompt material.

*U.S. Ethanol Prices Fall

U.S. ethanol prices declined the week ending June 7 after the DOE reported higher output and a rise in inventories for the week ending May 31. Cash margins for manufacturing ethanol decreased as corn costs advanced. Prices for D6 RINs, essentially grain-based ethanol, climbed again.

*U.S. Output of Ethanol-blended Gasoline Reaches All-time High

U.S. ethanol-blended gasoline production reached a record 8.65 MMB/D the week ending June 7, up from 8.33 MMB/D in the previous week. Though U.S. ethanol production remained high at 884 MB/D, stocks fell below 16.0 million barrels for the first time since November 2009.

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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