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PIRA Energy Group analysis: Week ending 8th September, 2013

Hydrocarbon Engineering,

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

  • Current positioning and likely September deflationary type headlines, due in part to a challenging calendar, but also the start up of Iranian nuclear negotiations, pose downside risks to oil prices. However, the burgeoning momentum to own oil seems poised to push oil prices higher in the short term.


  • Commercial inventories increased for the week ending 30th August, as product stocks swung from a draw the week before to build. Added supply resulted from product demand weakening and product output increasing. This more than offset a product import decline.
  • Last year for the same week, product stocks declined as refinery operations were curtailed by Hurricane Isaac. Hence, the year on year product stock excess widened with the bulk of the excess in gasoline and other products.
  • Crude stocks at Cushing, Oklahoma, have fallen for nine consecutive weeks, a total of 15 million bbls since late June.
  • Southern price spreads remained tight, with West Texas Intermediate (WTI) discounts to Atlantic Basin light crude averaging US$ 4 -5/bbl in August.
  • Northern spreads were mixed, as oilsands upgrader maintenance restricted synthetic crude supplies while raising bitumen production.
  • Propane building season continues but at a slow pace, despite the latest week’s surge in the US as exports remain high, petchem feed usage is ongoing and the crop drying season is just weeks away.
  • US ethanol prices rose to a two month high in the week ending 30thAugust. The jump was due primarily to the scarcity of corn in the Midwest, causing ethanol production to drop to a 21 week low. Also providing support were petroleum prices, which rose to a two year high.


  • Europe is starting to attract cargoes as North Sea maintenance continues and petchem feestock usage is quite favourable.
  • The Northern Hemisphere needs to start preparing for the upcoming heating season.


  • Crude runs began to decline as turnarounds started to gear up and crude imports rose sufficiently to produce moderate crude stock build.
  • Gasoline demand eased modestly, while gasoil demand remained strong
  • Stocks of both crude and gasoline posted only modest changes on the week.
  • Kerosene demand rose and with a lower yield the stock build rate slowed.
  • Refinery margins remain very poor.

Saudi Arabia

  • Saudi’s formula prices for October were recently released. In Asia, differentials were raised most aggressively on lighter grades, but the differential for Arab heavy was left unchanged.
  • While price adjustment was termed ‘less aggressive’ than market expectations, margins remain woefully weak, particularly for topping configurations.

Adapted from a press release by Emma McAleavey.

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