NYC-based PIRA Energy Group reports that improving VMT and trucking trends confirm better highway fuel demand growth. On the week, U.S. product stocks declined again, while in Japan crude stocks built. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:
Improving VMT and Trucking Trends Confirm Better Highway Fuel Demand Growth
The Federal Highway Administration recently released vehicle miles traveled (VMT) data for August, while the American Trucking Association released its Truck Tonnage Index for September. Both indicators showed improvements versus year-ago, and this confirms the improvement in both gasoline and estimated on-highway diesel demand growth. PIRA's forecast through year-end, for both gasoline and diesel, suggests that both these indicators from FHA and ATA should continue their improving trend.
Another Huge U.S. Product Inventory Decline
Overall commercial oil inventories in the United States fell almost 6 million barrels for the week ending November 8, with a product inventory decline more than offsetting a crude stock increase. Product inventories have declined for nine consecutive weeks, falling over 42 million barrels but are expected to moderate over the next few weeks. With crude runs strongly moving up, this should translate into crude stock declines, particularly at the Gulf Coast. The stock excess to last year narrowed this past week.
In Japan, Runs Continue Rising, Crude Stocks Build
Runs continued rising post-turnaround and crude imports stayed sufficiently high to produce another large crude stock build. Gasoline and gasoil demands eased but their yields were notably lower so stocks of both were only modestly changed. Kerosene demand eased slightly but yield jumped such that stocks resumed building. Refinery margins moved slightly higher as light and heavy cracks showed modest improvement.
Tight LPG Markets
U.S. propane markets remain quite tight as crop drying, exports, petchem feed use and meeting winter needs combine to pull stocks lower. Propane has reached its highest value relative to WTI so far this year. Various supply limitations are helping pressure international prices higher just as winter weather is approaching. LPG has been priced out of the chemical feedstock pool.
U.S. Ethanol Prices Decline
Most ethanol prices declined early the week ending November 8 before advancing thereafter due to strong domestic and export demand, as well as higher corn prices. Cash margins for ethanol manufacture fell to the lowest level in 11 weeks.
EPA Proposes Biofuel Requirements for 2014
Friday afternoon, the EPA issued a regulatory announcement that proposes to substantially reduce the 2014 biofuel requirements set forth in the Renewable Fuel Standard (RFS2). The Agency proposed specific volumes and is soliciting comments for selecting a value from specified ranges for total, advanced and cellulosic biofuels.
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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