PIRA’s analysis of oil market fundamentals has revealed the following:
- Brent crude prices came off their early September highs but further crude price declines will be limited by tighter near term supply/demand balances. Supply losses remain huge.
- Refinery runs bottom in October as maintenance peaks but then runs recover.
- The WTI dated Brent spread is stabilising near negative US$ 5 -6/bbl.
- Atlantic Basin gasoline cracks should stay generally weak as inventory coverage remains ample.
- Middle distillate cracks should move higher over the next few months.
- Margins will recover in the weeks ahead, led by the growing middle distillate strength.
- Product inventories declined for the week ending 27thSeptember, but this was overwhelmed by crude oil build. The resulting five million bbl inventory increase is in sharp contrast to last year’s inventory decline for the same week last year. This widened the year on year inventory excess to 2.2%. Most of the excess is gasoline.
- Ethanol values in Chicago rose during the week ending 6th September due to scarcity of corn in the Midwest which caused production to fall to a 22 week low and inventories to drop to the lowest level in two months.
- Cash margins for ethanol production rocketed to the highest level since November 2011.
- US ethanol production rose to a 4 week high of 848 million bpd in the week ending 6th September, from 819 million bpd in the preceding week.
- Facilities in the Midwest have been able to secure corn via barge and rail from as far south as Mississippi, where the 2013/2014 harvest has already begun.
- US propane stocks were relatively low at the beginning of the fourth quarter and are likely to remain so given crop drying activity, petchem feed use and growing exports.
- Ethane stocks continue relatively high.
- Butane inventory is dropping as gasoline blending picks up the pace.
- Propane continues as a preferred olefin cracker feedstock in Europe, helping sustain demand until winter requirements pick up.
- Crude stocks built due to imports rising following the impacts of the most recent typhoon.
- Gasoline and gasoil stocks drew. For gasoline, the draw was due to good demand, while for distillate it was driven by low refinery yield and higher incremental exports.
- The kerosene stock build rate increased, but the 4 week build rate remained about the same.
- Refining margins continue to slowly improve from poor levels.
- Saudi’s formula prices for November were recently released. In Asia, differentials were lowered most aggressively on lighter grades, but the differentials for Arab Medium and Heavy were raised, with Heavy being raised the most. Asian margins have been poor, so the generous terms on the lighter grades were in line with market economics.
- Final June data and preliminary July data for OECD Europe were released on Thursday. When combined with US and Japanese estimates these figures continue to point to low inventories in the three major OECD markets.
- June stock data were revised lower and the second quarter is now showing an inventory decline compared to last month’s increase.
Adapted from a press release by Emma McAleavey.
Read the article online at: https://www.hydrocarbonengineering.com/gas-processing/08102013/pira_energy_group_analysis727/