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PIRA Energy market recap: Week ending 14 September 2014

Hydrocarbon Engineering,

PIRA Energy Group analysis of oil market fundamentals for the week ending 14 September has revealed the following:


Oil prices in Asia are likely to remain soft. Asian oil demand will pick up in the fourth quarter and support a rising run profile post turnaround. The continued glut of Atlantic Basin crude will need to be moved to Asia which will keep Brent-Dubai narrow.

According to PIRA, eventually Asian crude demand will rise and some of the surplus should be drawn, thus presenting a floor to prices. Gasoil cracks should be supported by seasonal demand increases, while gasoline cracks will weaken seasonally. Refinery margins should show improvement from weak levels seen earlier, but new refinery capacity both in Saudi Arabia and the UAE will present challenges in arbing product of the Asian theatre.


Crude runs fell back slightly and imports rose, thus building crude stocks. Finished product stocks continued rising, though gasoline and gasoil stocks posted a draw. Gasoline demand continues to come in below expectations, but gasoil demand was quite strong over the past week. Kerosene demand was higher on the week and the stock building rate came in slightly less than seasonal norms. Refining margins remain poor, but there was a slight improvement in gasoline and middle crack distillates.


PIRA reports that the stock data for the week of 5 September reflected a rebenchmarking to the latest (June 2014) monthly, raising the possibility that weekly stock changes might be distorted when one week is indexed to a new benchmark, and the prior week to an older one. There were larger than expected light product builds, and an unusual propane draw. Looking at the data as reported, crude stocks drew more this year than last, slightly widening the year over year deficit.

Propane prices reacted to Wednesday’s EIA surprise of near unchanged stocks by climbing an additional 2% this week. Butane was dragged a penny lower to US$ 1.27/gal. by a large drop in gasoline prices, although butane blending economics remain extremely robust. US LPG price increases will likely moderate or retrace as stock building resumes in the coming weeks, and as the spot arbitrage to Europe and Asia remains challenged, if not closed.


Most US ethanol assessments reached seven months lows on 4 September as the DOE reported that stocks built 356 000 bbls and the production of ethanol based gasoline fell 1.1% from the previous week. Corn futures were also the lowest over four years.

US ethanol blended gasoline manufacture plummeted to 8553 million bpd the week ending 5 September from 8803 million bpd during the previous week, as total gasoline output declined. US ethanol output rose to 927 000 bpd from 921 000 bpd as production outside of PADD II reached another record high.

Adapted from a press release by Emma McAleavey

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