NYC-based PIRA Energy Group believes that Oil balances remain in surplus with pressure peaking in April/May. In the U.S., last week's data was impacted by fog and now this week marine traffic has been halted. In Japan, crude runs continue to ease but crude stocks were lower. Specifically, PIRA's analysis of the oil market fundamentals has revealed the following:
Asia-Pacific Oil Market Forecast
Oil balances remain in surplus with pressure peaking in April/May from rising crude stocks. Product stocks are more balanced but a growing overhang will unfold. The adjustment process to clear the Atlantic Basin crude surplus has been slow to unfold. Increased movements of North Sea crude to Korea occurred for March and April supporting Brent, but Middle East producers remain keen to maintain Asian market share.
Houston Ship Channel Problems Distorting Weekly Data
Last week's data was impacted by fog and now this week marine traffic has been halted in the Houston Ship Channel because of a collision between a chemical tanker and a bulk carrier and resulting MTBE spill. Almost 1.45 MMB/D of refining capacity is located in this vital shipping area. Crude imports and product exports not surprisingly have been delayed, and also runs have been curtailed. With much lower product exports, which were already expected to be low with a closed distillate export arb, reported demand is very low, hitting a new low for the year this past week of 18.61 MMB/D, down 1.0 MMB/D week-on-week.
Japanese Crude Runs Continue to Ease but Lower Crude Stocks and Higher Product Stocks
Crude runs eased again as maintenance gathered steam. Crude stocks drew on a low import figure, while finished product stocks built. All the major products built stocks slightly. The indicative refining margin remained strong. Gasoline and gasoil cracks firmed, thus offsetting declines in the fuel oil, naphtha, and jet fuel cracks.
Latin American Oil Market Report
Latin American light product imports will level off in 2015. New and returning refinery capacity in Brazil, Colombia, and Ecuador will boost refinery runs covering demand growth. Net gasoline and diesel imports in those three countries will decline in 2015.
U.S. Distillate Demand Weakness Due to Declining Long-Haul Truck Traffic
U.S. distillate demand has been weaker than generally expected. PIRA's internal models estimate the loss at roughly 120 MB/D in 2013 and by 125 MB/D in 2014. This note identifies long-haul trucking as the likely explanation for this weakness. Based on a statistical investigation of the decline in long-haul trucking, we estimate the annual average loss in distillate due to the fall-off in long-haul trucking at 118 MB/D for 2014 and 82 MB/D in 2013.
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.
