PIRA Energy Group analysis of oil market fundamentals for the week ending 2 November has revealed the following:
Overall inventories fell over the past week, 2.7 million bbls more than the decline last year for the same week. Products led the inventory decline, the largest weekly decline this year as refinery runs hit their seasonal low and reported demand surged on the week. A large chunk of this demand increase was in distillate largely because of peaking harvest demand and in propane because of downstream movements in preparation for the winter. Compared to last year, the stock excess narrowed.
US LPG prices rebounded this week on the first propane stock draw of the season. The sizeable draw helped propel December NYMEX propane futures 3.4% higher on the week. Cold weather increased by the need for heating fuels in the reference week with heating degree days growing 54% week on week. Apparent demand jumped by 335 million bpd (28%) from the week earlier to 1.5 million bpd. Butane prices rose 4.6% to US$ 1.12/gal., garnering strength from steadily decreasing weekly NGPL stocks in the EIA weekly data. Ethane prices gained 1.8 cents higher with higher natural gas prices.
Ethanol production spiked to a ten week high of 937 million bpd the week ending 24 October 2014, up from 896 million bpd during the preceding week. Inventories decline for the fourth consecutive week, dropping from a 5 month low 17.0 million bbls, led by a 670 000 bbl draw in PADD 1.
Cash margins for ethanol manufacture in the US rebounded during the end of October following eight consecutive weekly declines.
Oil prices are likely to remain soft, even assuming a substantial cut at the November 27th OPEC meeting, though there would be a psychological bounce if cuts are enacted as PIRA assumes. The oversupply of crude will grow into 2015, with stock building forecast for each of the first three quarters. Without an OPEC cut by year end, the market would deteriorate further as the imbalances would be that much greater.
Crude runs eased back, while crude imports rose from the low level seen the previous week, building crude oil stocks. Gasoline demand was slightly weaker and stocks built modestly. Gasoil demand rebounded from a low level and stocks drew slightly. Refining margins remain soft but all the major cracks improved on the week.
Adapted from a press release by Emma McAleavey.
Read the article online at: https://www.hydrocarbonengineering.com/petrochemicals/04112014/pira-analysis-1563/