PIRA Energy Group has said that it is too early to get long oil and in the US the stock surplus has jumped.
- PIRA expects the bulk of 1H15 inventory builds to be in crude oil.
- As crude inventories build, more expensive storage will be required which will relatively weaken prices.
- The above could be mitigated, according to PIRA, by an increase in demand from the current depressed levels.
- Such an increase in demand is unlikely to be strong enough to offset the weight of the impending increase in inventory supply.
- In this environment it is difficult for crude oil prices to rally.
- The global imbalance between supply and demand compared to last year is apparent in the US stock data.
- 2013 stocks decreased this week past while in 2014 they increased.
- Crude stocks are now 25 million bbls higher than in 2013, having begun the quarter 7 million bbls lower.
- From deficits last year beginning the fourth quarter, gasoline and distillate stocks are now higher.
- Permanently closed refineries have had a significant affect in lowering crude run demand and subsequent gasoline and distillate production.
- Refinery runs will increase in 2H15 driven by the startup of a new refinery in Brazil and the restart of revamped capacity in Colombia.
- Product import will level off, breaking the growth trend of the last few years.
- The primary supplier of products for import into the region will remain the US.
- Recent economic performance in the country has been a bit disappointing.
- Growth prospects have improved, however, as lower oil prices will allow households and businesses to increase spending and the central bank to loosen monetary policy.
- End user oil prices dropped sharply in recent months, including those for diesel.
Read the article online at: https://www.hydrocarbonengineering.com/refining/07012015/oil-market-recap-week-end-jan-4/