NYC-based PIRA Energy Group reports that Aramco formula crude prices for February cut for Asia and Europe, but U.S. raised. In the U.S., crude leads stocks lower. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:
Aramco Formula Crude Prices for February Cut for Asia and Europe, but U.S. Raised
Saudi Arabia's formula prices for February were recently released. Pricing adjustments for the key markers were lowered for the Asian and European destinations. The reductions for Asia were greatest on the lighter grades, though there was also a reduction in the Arab Heavy differential. European pricing while also reduced, was generally less aggressive than for Asia while the largest reduction was on the heaviest grades.
Crude Leads Stocks Lower
Total U.S. commercial inventories fell this past week with the entire decline occurring in crude oil. Product inventories increased marginally as crude runs stayed at an extremely high rate while reported demand fell on the week in large part because of the Christmas Holiday. For the same week last year, stocks fell so the year-on-year stock deficit narrowed.
U.S. Refinery Turnarounds, January
The first six months of 2014 are expected to experience above average turnaround related refinery downtime. This compares survey results from previous years and does not take into account the high level of unplanned events which occurred over the past several years and are quite likely to be experienced in the new year as well. For example, PIRA's U.S. Refinery Turnarounds survey published on December 31, 2012 expected an average planned crude unit downtime for the first half of 2013 of about 1.6 MMB/D, also the highest level for the five year period from 2009 to 2013. Actual outages turned out to be closer to 2.3 MMB/D.
Tanker Markets Exited 2013 On a High Note
Tanker markets exited 2013 on a high note, with rates in most crude trades hitting new highs for the year in December while exceeding earlier expectations by a wide margin. The recent seasonal improvement in tanker rates is a reflection of higher global refinery runs, which rebounded strongly from autumn maintenance, increasing by 3.8 MMB/D from October to December, with 2.4 MMB/D of the increase in the Atlantic Basin. Tanker markets in the Atlantic Basin also benefited from weather, and strike-related delays in December.
Tight U.S. Propane Market and Looser Overseas Conditions
U.S. propane storage continues to fall to record low levels, with PADD II especially low. The extremely cold weather is causing production and logistical bottlenecks as well, and, of course pulling demand higher. The relatively warm weather overseas, especially in Europe, falling crude prices and the arrival of cargoes from the USGC and West Africa have been pulling international LPG prices lower.
U.S. Ethanol-Blended Gasoline Reaches a Record High
U.S. ethanol-blended gasoline production reached an all-time high during the week ending December 20. Ethanol prices were mostly higher in the holiday-shortened week ending December 27, and manufacturing margins rose for the first time in three weeks.
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.
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