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PIRA Energy Group oil market recap: Week ending 28th July 2013

Hydrocarbon Engineering,

Last weeks PIRA Energy Group analysis of oil market fundamentals has revealed the following:

  • A synchronised economic upturn in the developed world will lift softer emerging market economies. Tighter oil market supply demand balances and inventory declines will support price structure.
  • Weaker 2014 oil market balances, slower China economic growth, Iran nuclear talks, and current market positioning will all reduce the demand for inventory. Gasoline inventories are high, while diesel/gasoil stocks are relatively low, causing diesel cracks to take the lead while gasoline cracks decline.
  • Overall commercial oil inventories have fallen over four weeks, ending 19th July. The entire stock decline over this period has been in crude oil, which is also down in comparison to last year. Product stocks were roughly flat for the week, while the three major light products were down.
  • A large decline has also been reported in overall product stock build due to stronger reported demand, lower product imports, and lower product output (runs).
  • Europe remains relatively tight and will need to price to attract product, especially as more extensive North Sea maintenance gets underway.
  • Crude runs rose and imports backed off sufficiently to draw crude stocks. Gasoline stock remained strong post holiday, leading to a draw in gasoline stocks. Gasoil stocks also drew.
  • Kerosene demand remained reasonably low, and kerosene stocks continued building.
  • Weakening fuel oil cracks are having a noticeably negative effect on refinery profitability, but wide light product cracks are allowing cracking refineries to enjoy reasonably strong margins.
  • LPG from the US Gulf Coast has been exported largely to Latin America, with incremental barrels going to Asia.
  • US ethanol prices have followed an inverted V-shaped curve during the week ending 19th July, rising to a five week high before giving back most of their gains by Friday.
  • Ethanol RINs soared due to aggressive buying by a few obligated parties.
  • Cash margins for ethanol manufacture advanced for the fourth consecutive week as average product prices increased while corn costs declined.
  • Biodiesel manufacturing margins also improved and were the highest since September 2011.
  • US ethanol production declined sharply to an 11 week low as plants in the Corn Belt reduced output due to dwindling corn supplies. The US received 41 million bpd of imports, including the first shipment into PADD V since early June.

Adapted from press release by Emma McAleavey.

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