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PIRA Energy Group finds: Quebec derailment tragedy won’t halt oil by rail

Hydrocarbon Engineering,

PIRA Energy Group’s weekly Energy Market Recap, which alerts readers to PIRA’s current analysis of energy markets around the world and the key economic and political factors driving those markets, indicates that the Quebec derailment will not halt oil by rail.

The 6th July derailment of a crude train in Quebec has sparked intense debate in regards to the safety of crude transportation by rail, provoking many to argue that it is safer and less environmentally damaging to utilise alternative methods, primarily pipeline.

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

  • Another huge US crude stock draw offset a product inventory increase. This left commercial oil inventories down for the week ending 5th July. Stock decline narrowed the year on year excess, which has halved in the past two weeks. Crude stocks are now below last year’s figures.
  • Japanese pre holiday gasoline and gasoil demand figures were both strong, however yields for both were lower, drawing stocks. Crude stocks drew moderately as imports remained low. Gasoil stocks remain tight and supportive of cracks. Refinery margins continued to post gains as stronger light product cracks offset weaker fuel oil cracks.
  • LPG exports are heading to Latin American from the US Gulf Coast. High ethane and propane stocks remain an impediment to prices, although exports are keeping propane storage lower than last season. Most product is now flowing to Latin America, with other cargoes having been pulled to Asia.
  • US ethanol prices rebounded in the week ending 5th July due to a tightened market. Ethanol blending reached an all time high, but production fell to the lowest in approximately 6 weeks. Consequently, ethanol stocks were the lowest since October 2009. Renewable Identification Number (RIN) values for both grain based and sugarcane based ethanol were at or near all time highs.
  • US ethanol output rose to 881 million bpd during the same week, up from 863 million bpd in the preceding week. PIRA predicts that this bump in production will be short lived due to the fact that many plants in states such as Indiana and Illinois are running out of corn, having suffered through two consecutive bad crop years.

Adapted from press release by Emma McAleavey.

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