NYC-based PIRA Energy Group reports that the global economy continues to improve. On the week, the U.S. stock decline moderated. In Japan, runs continue rising, key product demands are stronger. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

Global Economy Continues to Improve

The global economy continues to improve, setting the stage for relatively strong oil demand growth next year. Fourth quarter global balances are tight and support ongoing price strength. Bearish supply darkens the 2014 price outlook, but PIRA reckons the downside will be limited with Saudi Arabia able to balance the market. The weakness will be felt mostly in the first half 2014 because of seasonal demand weakness and crude inventory builds.

U.S. Stock Decline Moderates

Overall commercial inventories fell slightly this past week, after four prior weeks of declines averaging 8.0 million barrels per week. Crude stocks built as crude imports stayed stubbornly high, especially from the Middle East. Product stocks drew as higher product supply and lower reported demand reduced the week-on-week product inventory decline. The year-on-year inventory excess remained modest, with the excess mostly in crude, largely related to new infrastructure associated with rapidly expanding North American production. 

Japanese Runs Continue Rising Post Turnaround, Key Product Demands Stronger

Runs continued rising post-turnaround but crude imports moved strongly higher and stocks built 3.1 MMBbls. Both gasoline and gasoil demand displayed decent gains and inventories of both drew. Kerosene demand remained strong and stocks continued drawing. Refinery margins, again, moved slightly higher. 

Scramble for LPG Supply Continues

U.S. propane stocks continue to draw at a rapid pace and are expected to end the year well behind last year's level.  International LPG prices are reaching record levels amidst significant supply disruptions. 

Ethanol Output Matches Yearly High

U.S. ethanol production rebounded the week ending November 22, equaling its annual high of 927 MB/D, which had been reached two weeks earlier.  Inventories declined by 61 thousand barrels to 15.02 million barrels, only slightly higher than the three-year low of 14.96 million barrels reported near the end of October. 

Ethanol Prices and Margins Spike in November

In November, U.S. ethanol prices and manufacturing margins skyrocketed to the highest level in two years, but gave back some of the gains last week. Very low inventories and a shortage of railcars to take ethanol to the blenders drove the market up. Companies are reluctant to hold stocks with the market in severe backwardation.

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.