NYC-based PIRA Energy Group believes that stronger economic headlines are ahead. In the U.S., we had the largest stock build of the year. In Japan, crude stocks jumped, but products drew. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:
Stronger Economic Headlines Ahead
Physical crude oil markets will struggle with stock builds. PIRA sees a renewed interest in financial investment in commodities. The oil shale revolution in North America has directionally moved the oil price setting point to the United States. The gasoline season this year looks set to be healthy. Political risks have been balanced but are skewed bullish ahead.
Largest Stock Build of the Year
With runs picking up now that the lows for the refinery maintenance season are in, product inventories fell this past week. This was less than the prior week product inventory decline as reported demand fell while product supply from higher imports and aforementioned runs increased. Despite the increase in runs, the weekly crude stock build was the largest of the year. Both the product and crude year-over-year stock deficits narrowed.
Japanese Crude Stocks Jump, but Products Draw
Total commercial stocks rose 3.0 MMBbls, with crude rising 3.3 MMBbls due to higher crude imports. Product draws were most notably registered for gasoline and gasoil. Kerosene stocks transitioned to stock building mode. The indicative refining margin was modestly lower.
Low Storage as Entering Shoulder Season
The collision in the Houston Ship Channel this past week delayed outbound LPG shipments. Nevertheless, propane stocks are expected to still draw for March, leading to quite low storage entering the shoulder season. Inventory will continue to sharply lag year-ago levels. Also ethane inventory reached below 30 MMBbls this January for the first time in 22 months. Stocks will continue to decline during the course of the year. Delays in USGC exports as well as outbound from Europe cargoes has tightened the European market just as feedstock demand is gaining momentum
Biofuels Programs Continue To Proceed Actively in Many Countries
Canada is expected to need about 2.2 billon liters (580 million gallons) of ethanol this year to satisfy its 5% ethanol mandate. The country has imported over 1 billion liters of ethanol per year over the past three years, nearly all from the United States.
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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