NYC-based PIRA Energy Group reports that global Asian oil markets remain supported on a global basis. On the week, U.S. stocks fell, split about equally between crude and products.  In Japan, crude stocks drew on higher runs and contained imports. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following: 

Asian Oil Markets Remain Supported on a Global Basis

Oil prices remain at the top of their trading range with firmness being supported by tightened crude balances which are being fueled by supply losses from producers such as Libya and Iraq and ongoing outages from Syria and Nigeria. All told, the market is currently at its maximum point of physical strength, with high runs, supply losses and crude stock declines. 

Overall Commercial Inventories Decline

U.S. stocks fell for the week ending August 16, split about equally between crude and products and matching last year's inventory decline for the same week. This left the inventory excess 1.9% above year ago levels. The bulk of the excess inventory is in gasoline. Overall adjusted oil demand growth is now running just 0.9% above year ago levels. This is the second week in a row that demand growth was no higher than 1% after three earlier weeks of near 3% growth. Some of PIRA's other energy indicators of economic growth (e.g. electricity demand) have also been weakening, which is not a good sign for the economy. 

Two Weeks of Japanese S/D Data

Two weeks of data were reported this past week due to the mid-August hiatus. Crude stocks drew on higher runs and contained imports. Gasoline demand was expectedly strong. Conversely, gasoil demand eased sharply due to the typical mid-August vacation impacts and stocks built, even with higher exports. Kerosene stocks continued to build seasonally, with the average build rate over the last two weeks being relatively high. 

Slow U.S. Stock Building

U.S. propane storage is building rather slowly pushing its price higher going into the crop drying and heating seasons. Butane demand will gain for gasoline blending while ethane continues to be impacted by steam cracker outages. 

Ethanol Prices Advance

U.S. ethanol prices rose the week ending August 16 due to higher corn costs and a tighter market with lower inventories. Prices were also supported by concerns that output will decrease prior to the next harvest because of plant maintenance and corn shortages. RIN prices rebounded after falling to a three-month low in the previous week.

Ethanol Output Decreases

U.S. ethanol production declined to 844 MB/D the week ending August 16, the second lowest level since April, and down from 857 MB/D in the preceding week. Due to dwindling supplies, some ethanol producers have contracted to barge in corn from as far south as Louisiana, where the 2013/2014 harvest has already started. 

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.