NYC-based PIRA Energy Group reports that market fundamentals for onshore North American light crude remained strong. On the week, a crude stock build in the U.S. offset product stock draws. In Japan, crude stocks built moderately week-on-week. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:
*Onshore North American Light Crude Fundamentals Remain Strong
Market fundamentals for onshore North American light crude remained strong in Canada and the Rockies, and recovered in West Texas. However, heavy Canadian crude prices remained soft, and the much-anticipated expansion of the Seaway pipeline had only a muted effect on the Cushing market.
*U.S. Stocks Roughly Flat: Crude Build Offsets Product Draw
With crude runs likely near the lows of the winter maintenance season, U.S. commercial product stocks showed another decline the week ending February 1. However, this was offset by a crude inventory build.
*Japanese Crude Stocks Build Moderately Week-on-Week
Japanese crude imports surged the week ending February 2, leading to a moderate crude stock build. Incremental gains in gasoline exports allowed gasoline stocks to draw, while a reduction in gasoil exports built gasoil stocks. Kerosene demand fell back seasonally; however, a strong yield produced a contra-seasonal stock build of moderate proportions.
*BP Whiting Refinery Upgrade Start-Up Delayed
Reported delays in BP’s Whiting Refinery Modernization Project will have a minor impact on Cushing light crude balances (first negative, then positive), as well as delay until early 2014 the expected improvement in Canadian heavy crude differentials.
*China: 2013 Leadership Transition and the 12th Five-Year Economic Plan
China’s recent leadership transition, coupled with the latest (12th) five-year plan, suggest a general agreement among Chinese officials about the necessity of undertaking structural reforms and promoting a more sustainable development model. The uproar over smog pollution issues in Beijing and officials’ public acknowledgement of the problems serve as examples of how officials increasingly feel compelled to reform.
*LPG Weekly Scorecard
In the U.S., propane inventories began the month at record levels, with an outlook for relatively warm weather during February. Ethane storage is also at a record, with cracker usage expected to pick up. In Europe and Asia the end of winter is approaching, especially with most supply commitments done for February. A backwardated market makes it difficult to reach commitments beyond buying for immediate needs. Olefin producers will need to step up buying and are likely to do so.
*Ethanol Production Increases Slightly Week-on-Week
In the week ending February 1, U.S. ethanol production rose slightly to 774 MB/D, rebounding from the lowest level since October 2009. The U.S. did not import any ethanol for the first time in 18 weeks. Inventories declined by 442 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