NYC-based PIRA Energy Group reports that crude prices plunged in July, with the WTI price averaging just over $50/Bbl. In the U.S., stocks are flat but excess widens. In Japan, crude runs moved higher, with still higher crude stocks. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:
North American Midcontinent Oil Forecast
Crude prices plunged in July, with the WTI price averaging just over $50/Bbl – down $9/Bbl from June. Canadian prices fell even more, some $12-15/Bbl. In early August, prices were continuing to slide, with WTI falling to the mid-$40s. Heavy Canadian grades have fallen below $30/Bbl, implying bitumen values approaching $20/Bbl.
U.S. Stocks Flat but Excess Widens
This past week's crude stock draw offset a product build leaving inventories flat for the week. Year-on-year the stock excess widened to 153 million barrels, up 8 million barrels on the week. The largest portion and bulk of the excess is in crude while the smallest excess is in gasoline.
Japanese Crude Runs Move Higher, with Still Higher Crude Stocks
Crude runs surged as maintenance wound down and storm impacts faded. Crude imports remained high and stocks built despite the run increase. Finished product stocks drew slightly, mostly on lower naphtha inventory and a slight draw on gasoline. Finished product demands were, on balance, higher. The indicative refining margin has come well off its June peak and continues to soften.
Aramco Differential Adjustments for September — Clearly Not Incentivizing Liftings
Saudi Arabia's formula prices for September were just released. The adjustments indicate no effort to incentivize increased liftings, even though there will be more avails as summer domestic crude burn begins to ease. Differentials to Asia were raised, Europe cut, and the U.S. were raised for the lightest and heavies grades. The Asian increase was against a backdrop of weaker refining margins and an eroding Saudi advantage against competing African crude for Asian refiners.
Asian LPG Prices Plumb New Lows
Propane futures in the Far East tumbled to $406/MT, the lowest price since March 2009. Saudi CP futures, instruments designed to hedge and speculate on the future direction of contract prices set by Aramco, fell to $326/MT – the lowest level since contract inception in Jan 2009.
Ethanol Prices and Margins Increase
Most U.S. ethanol prices managed small gains the week ending July 31 as production hit a ten-week low. Manufacturing margins improved for the second straight week because of lower corn costs.
Ethanol Output Reaches 11 Week Low
The U.S. ethanol industry reached several extremes the week ending July 31, with ethanol stocks dropping to a 2015-low and ethanol-blended gasoline production climbing to a record high.
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.
