NYC-based PIRA Energy Group believes resource control policies remained in a holding pattern in 2014, despite the collapse in oil prices in the second half of the year. In the U.S., commercial stocks decline slightly. In Japan, crude runs stay high, crude stocks build, and products drew. Specifically, PIRA's analysis of the oil market fundamentals has revealed the following:
Lower Oil Prices Do Not Yet Affect Resource Control Policies
Resource control policies remained in a holding pattern in 2014, despite the collapse in oil prices in the second half of the year. Some marginal easing of contract terms did materialize in countries including Argentina, China, and the UK, but the majority of oil-producing countries maintained their existing policies toward foreign and private investment. Moreover, history suggests it would take a few more years of depressed prices to trigger a widespread move to ease contract terms and accommodate foreign investment.
Overall U.S. Commercial Stocks Slightly Decline
Last week's large crude stock increase was met for the first time this year with an even larger product stock decline, causing overall inventories to fall, for the first stock decline in 2015, albeit modest. Stocks fell a little bit more last year for the same week, pushing the year on year inventory surplus up. Crude oil accounts for 63 million barrels, or 45%, of the year on year surplus.
Japanese Crude Runs Stay High, Crude Stocks Build, Products Draw
Crude runs rose again and reached their highest level since mid-March of last year. Crude imports remained strong and crude stocks built. Finished product stocks drew with moderate draws for naphtha and kerosene, and lesser draws on the other major products. The indicative refining margin remained strong, with all the major product cracks firming.
Mont Belvieu NGLs Outperform
Strong heating demand drove a major draw in domestic propane stocks and was enough to keep propane prices unchanged on the week, despite a 5.5% decrease in crude prices. Butane prices gave up 1.6% as the end of blending season nears, while natural gasoline fell 1% week-on-week. Ethane was carried higher with natural gas, increasing 1.2¢ to 18.9¢/gal.
Ethanol Prices Rise
U.S. ethanol prices advanced the week ending February 13. Economics held relatively steady for the second straight week, with margins for PIRA's model plant based on Chicago values improving slightly, while those for PIRA's Iowa plant worsening a little.
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.
