PIRA Energy Group’s analysis of oil market fundamentals for the past week has revealed the following:
World oil market forecast
PIRA is cautiously optimistic that the global economy will withstand the Fed’s policy shift and lift into next year with growth above trend. Despite this, and a rebound in oil demand growth, oil market balances are forecast to deteriorate in 2015.
Overall inventories increased over the past week, with crude stocks declining while product stocks increased. The product inventory increase was 4 million bbls greater than the week earlier as reported demand fell, product imports increased and runs were trimmed. Runs were higher than PIRE forecast as the industry ran as much capacity as possible in order to take advantage of attractive margins before capacity goes down for maintenance.
The downward trend in US ethanol prices accelerated, with values pressured by soaring inventories, weak consumption, and high production. Cash margins for ethanol manufacture declined for the fifth straight week to the poorest value since February.
Latin American refining capacity is constrained in 2014 by refinery maintenance leading to increased product import growth and higher crude exports, particularly in the fourth quarter. Latin American economic growth prospects have been ratcheted down in the last few months. With slower demand growth and returning/expanded refinery capacity next year, product import growth will not be as strong. Nearly all other Latin American countries are also seeing substantial product imports from the US, which supplies approximately 80% of regional import needs for diesel.
November propane FEI futures fell 5.1% to US$ 821/mt, the lowest price in six weeks. The markets are posturing for tomorrow’s announcement of October contract prices by Aramco. The latest CP futures markets are betting that propane CPs are lowered by US$ 10/mt, while the weighted average of September trading indicates that prices could remain unchanged from September at US$ 745/mt. Butane’s premium to propane was stable in September, falling US$ 3 to US$ 34/mt.
Crude runs rose and crude imports declined such that crude stocks drew. Finished product stocks continued rising. A good part of the rise has been in kerosene, which is strictly seasonal. But gasoline and gasoil have also posted modest stock builds. Refining margins remain soft.
Adapted from a press release by Emma McAleavey.
Read the article online at: https://www.hydrocarbonengineering.com/gas-processing/30092014/pira-analysis-1327/