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PIRA oil market recap: Week ending 2nd March 2014

Hydrocarbon Engineering,

PIRA believes that recent economic softness will be temporary and continues to expect above trend growth in 2014. Global refinery runs will bottom in April and then move sharply higher by midyear. Light product inventories will remain low, but diesel cracks will ease seasonally while gasoline cracks strengthen.

PIRA’s analysis of oil market fundamentals additionally revealed the following:


  • Commercial oil inventories decresased 0.5 million bbls, all of which was in products. This is the seventh consecutive week of stock declines.
  • Brent crude prices remain supported by relatively tight global supply demand balances due to continued supply disruptions and low stocks.>
  • US crude prices relative to Brent are anticipated to be choppy, with WTI stronger due to new pipelines.
  • The entire USG complex will see inventory builds during US refinery maintenance before tightening again later in the 2nd quarter.
  • Winter weather problems have led to a record deterioration in service performance for the major US railroads. These problems have contributed to the slight decline in US crude by rail volumes since early December 2013. It will take 2 -3 weeks for the rail system to recover from the cumulative effects of the weather, assuming that the rest of the winter returns to average. Hence, the impact on crude by rail volumes will continue to be felt until mid-March, at minimum.
  • US propane exports set a record in 2013 and are expected to increase further in 2014. This is likely to keep inventories low during this year.
  • The production of ethanol blended gasoline increased to a two month high of 8.364 million bpd in the week ending 21st February, from 8.069 million bpd in the preceding week.
  • Ethanol output has grown for the third consecutive week, reaching 905 000 bod for the first time in five weeks.


  • European distillate cracks will trends lower as seasonal demand eases.
  • Currently tight inventories will build back when Atlantic Basin runs ramp up after maintenance.
  • Gasoline cracks are likely to increase significantly over the next few months with Atlantic Basin inventories expected to be lower than last year.


PIRA’s analysis of pipeline flows shows that Russia can divert approximately half of the gas it moves through Ukraine to locations all over Europe. Spare capacity in the Nord Stream (Baltic) pipeline to Germany and the Yamal pipeline through Poland will allow Western Europe to receive most of the gas it needs. Central Europe and the Balkans could experience some scarcity if the Ukrainian route were to temporarily become unviable.

There is less potential impact in oil, since most Russian exports go by tanker from Russian ports in the Baltic and Black seas.

Edited from various sources by Claira Lloyd

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