NYC-based PIRA Energy Group reports that midcontinent crude differentials strengthen in April. On the week, another U.S. commercial stock build narrows the stock deficit versus last year. In Japan, total commercial stocks built. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:
Midcontinent Crude Differentials Strengthen in April
Canadian crude differentials strengthened relative to WTI in April, and all Midcontinent crude prices strengthened relative to Brent and LLS. Stocks continued to fall in Cushing, as recently installed pipeline capacity continues to move the PADD II crude surplus into PADD III.
Another Commercial Stock Build Narrows the Stock Deficit Versus Last Year
Although U.S. crude stocks posted their first weekly draw since the end of March, a total commercial stock build for the week of May 2 narrowed the year-over-year stock deficit by building at about twice the rate as the same week last year. The deficit of the four major refined products actually widened, while the deficit of propane and all other products was almost halved. Propane led the way with the largest weekly build in at least 10 years.
In Japan, Oil Balances Reflect Golden Week Holidays
Due to the "Golden Week" holidays, two weeks of data were reported this past week, both April 26th and May 3rd. Total commercial stocks built with finished products and crude rising. Runs declined in both weeks. There were two consecutive stock builds for both gasoline and gasoil. Gasoline demand didn't exhibit as much of a "holiday pop" as expected and stocks built both weeks. Gasoil demand declined due to holiday impacts and stocks built for both weeks.
Ethane Prices Tied to Natural Gas Prices
Low shoulder season demand will continue to pressure propane prices. Next week’s propane inventory report will be an important indicator. Excess ethane due to surging production will leave ethane prices tied to natural gas prices for some time to come.
Ethanol Prices Plummet
After a brief pause at the end of April, U.S. ethanol prices resumed their freefall the week ending May 2, as inventories built for the second straight week, reaching the highest level since July 2013. Cash margins declined again, but they are still substantially higher than at this time last year.
Aramco Announces Crude Price Differentials for June
Saudi Arabia's formula prices for June have just been released. Most notably, U.S. formula prices were increased by $0.80/Bbl versus the sour benchmark and stand at their highest levels seen yet. Since December 2013 the price for Saudi crude for U.S. destinations has risen by $3/Bbl compared to local competing USG grades. This will ultimately result in lower liftings by U.S. refiners and consequent repositioning of Saudi exports more toward growing Asian import markets.
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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