PIRA Energy Group has said that US$60 oil is not enough and that demand growth will outstrip supply growth without higher prices. In the US, the stock surplus continues to narrow and in Japan, runs are rising, as crude and product stocks build too.
- The divide over where oil prices are heading in the future is driven by diverging views on supply costs.
- One view is that there will be very large quantities of shale oil available at a cost under US$60/bbl, enough to meet demand growth and offset depletion of existing production.
- The other view is that shale volumes will not be sufficient and higher cost supplies will be required to balance global supply and demand.
- Year over year stock surplus decreased by 12 million bbls to 128 million bbls.
- Debt ratios are still acceptable for most US independents, major debt repayments are not due for a few more years, and several companies have mitigated the downside by hedging future oil production.
- There is also plenty of money available to lend, interest rates are still low and other factors, meaning that financing is not a major problem for most US independents.
- LPG prices rebounded strongly last week.
- July propane futures at the Texas market centres rallied 10%.
- Ethane prices were mostly unchanged.
- Ethanol production soared.
- Ethanol inventories declined by 878 000 bbls to 19.8 million bbls.
- Crude runs rose for the second straight week and crude imports recovered from low levels.
- Major product demand performance was weaker and finished stocks posted a build of slightly less than 1 million bbls.
- The indicative refining margin remains very good.
- Light product cracks eased slightly while fuel oil cracks were a bit stronger.
- Development of shale oil, which is specifically targeted by western sanctions, has slowed substantially.
- Activities in a number of JVs that have been formed with western partners were put on hold.
- Efforts to replicate the shale boom in the US have been hindered by the collapse of oil prices over the past year.
Read the article online at: https://www.hydrocarbonengineering.com/refining/01062015/oil-market-recap/