Oil market recap: Week ending 26 October 2014

PIRA Energy Group has said that it believes that cyclical strengthening is currently underway in the global economy with the US in a better position to support global growth. When it comes to the US, stock excess modestly widens and in Japan, crude runs have eased.

USA

• The inventory increase last week was slightly larger than in the same week last year.
• Crude oil stocks still remain at 2.1 million bbls below levels year on year.
• Middle distillate stocks are 1 million bbls below year on year and gasoline is 11.1 million bbls below.
• One product category is showing a large surplus and that is ‘other’ which consists primarily of NGLs.
• Cash margins for ethanol manufacture rebounded the week ending 17 October.
• On Friday 24 October, ethanol was US$ 1.78 /gal. in Chicago.
• Ethanol inventories have declined for three consecutive weeks.
• Ethanol production rebounded the week ending October 17.

Japan

• Crude runs eased last week.
• Crude imports declined sufficiently to draw crude stocks moderately.
• Gasoline demand was modestly higher, and stocks posted a small draw.
• Gasoline demand was weak, but lower yield tempered stock build.
• Kerosene demand continued to run at seasonally low levels with higher yield, which boosted the stock build rate.
• Refining margins remained soft with all the major product cracks, except middle distillates, weakening.

Shale

• PIRA expect shale oil production to be relatively sensitive to oil price drops, but with a slight delay.
• A price lower than US$ 80 on an LLS basis will reduce production, but this will emerge slowly in the first year.

Worldwide

• Cyclical strengthening is underway in the global economy.
• OPEC cannot rebalance oil markets because the surplus is too large.
• Oil markets will have to be rebalanced via price.
• The market will see greater contango but prices in the front of the market will inevitably be anchored by bullish medium term oil supply/demand balances.

Edited from press release by Claira Lloyd

Read the article online at: https://www.hydrocarbonengineering.com/refining/29102014/oil-market-recap-pira-29-oct/