NYC-based PIRA Energy Group reports that U.S. commercial oil stocks declined and Japanese crude stocks drew modestly on the week. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:*U.S. Commercial Oil Stocks Decline Week-on-Week.U.S. commercial oil stocks drew the week ending January 18, as a product stock draw outweighed a crude stock build. However, Cushing crude stocks declined, reflecting the restart of the Seaway pipeline at its new expanded capacity.
*Japanese Crude Stocks Modestly Draw Week-on-Week
For the week ending January 19, the Japanese data showed only minor incremental changes in the balances. Runs continued trending higher and crude stocks drew modestly. There were small stock builds in gasoline and gasoil, while the kerosene draw rate moderated back down. Product demands in the aggregate were lower, with declines posted for gasoline, gasoil, and kerosene.
*Very Short-Term Oil Markets Looking More Constructive
With February approaching, oil markets will get a boost from strong seasonal demand and resulting stock declines. Combine this with an improving macroeconomic setting and heightened geopolitical risks to supply, and international oil prices look set to rally in the very short term.
*Global Medium-Term Refining Outlook
Global refinery capacity growth lagged demand growth in 2005-2008, leading to tight light product balances and strong margins. Beginning in 2009, this reversed, with lower demand and accelerating refinery capacity growth, particularly for conversion capacity. Although 2012 was strong with a spate of Atlantic Basin refinery closures, the medium-term outlook is for continued overcapacity, maintaining pressure on margins.
*Increases in Indian Domestic Diesel Price Will Be a Headwind for 2013 Oil Demand
India’s economic sluggishness is expected to run its course soon, and GDP will start to strengthen in 2013. Oil demand growth is projected to decelerate, however, as the government has begun to remove subsidies for diesel at a very gradual pace this month. Indian vehicle sales struggled in recent months, but its long-term outlook is strong based on recently updated vehicle-population data.
*U.S. Imports a High Volume of Ethanol
The U.S. imported 67 MB/D (19.7 million gallons) of ethanol the week ending January 18, a relatively high volume for this time of the year, when Brazil’s South-Central region is in its inter-harvest period. Domestic production rose to 792 MB/D from 784 MB/D during the prior week, which had been the lowest output in over three years. Inventories declined by 278 thousand barrels to 20.1 million barrels.
The information above is part of PIRA Energy Group's weekly Energy Market Recap, which alerts readers to PIRA’s current analysis of energy markets around the world as well as the key economic and political factors driving those markets.
Source: PIRA Energy Group