NYC-based PIRA Energy Group believes that Saudi Arabian production is likely increasing. In the U.S., another record U.S. crude and total commercial stock level reported. In Japan, crude runs near seasonal maximums and product demands are better. Specifically, PIRA's analysis of the oil market fundamentals has revealed the following:
Saudi Arabian Production Is Likely Increasing
In discussions with Saudi customers and after reviewing recent U.S. refiner earnings calls, it is becoming clear that production from Saudi Arabia is rising. Saudi production had been averaging around 9.7 MMB/D since last June but PIRA would now guess likely additional demand has pushed output to just under, if not above, 10 MMB/D.
Another Record U.S. Crude & Total Commercial Stock Level Reported
The equation driving the U.S. crude balance is as simple as it is powerful: the 1.4 MMB/D year-on-year increase in domestic crude supply has only been met by a 0.3 MMB/D decline in imports, and the combined increase in crude runs plus exports is not nearly enough to prevent large stock builds in crude from continuing, especially this year versus last. Total commercial stocks built last week to a new record high. However, with a similar build last year, the year-over-year surplus inched up only about 0.1 million barrels.
Japan Crude Runs Near Seasonal Maximums, Product Demands Better
Crude runs rose fractionally, but crude imports rebounded and stocks built. Finished product stocks drew with a pickup in gasoil, gasoline, and kerosene demands. The indicative refining margin remained strong.
U.S. NGLs Stronger Last Week
A large decline in U.S. propane stocks propelled April Mont Belvieu futures over 8% higher to just under 60¢/gal, the highest price for C3 since December 4th. Propane's price relative to WTI rallied to over 45%, the strongest yet this year. April butane was 6% stronger week-on-week despite a disappointing decline in other NGLs stocks as reported by the DOE on Wednesday.
Ethanol Output Increases
U.S. ethanol production rebounded to 961 MB/D the week ending February 6, regaining around half of the sharp loss that occurred in the previous week. The production of ethanol-blended gasoline fell sharply.
Asia-Pacific Oil Market Forecast
Crude stock builds continue at a reduced pace and will give way to product stock builds. Global demand growth, year-on-year, is beginning to look better. The macroeconomic environment in Asia shows no large-scale deterioration in performance that would put our 5.3% Asian GDP growth assumption for 2015 at risk.
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.
