NYC-based PIRA Energy Group Reports that Asian oil fundamentals remained largely positive. On the week, U.S. commercial oil stocks increased and Japanese crude stocks built, but finished products drew. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

Asian Oil Fundamentals Remain Largely Positive

Oil prices will come under the increasing influence of global crude stock building as refinery maintenance takes hold. Asian gasoline cracks should improve seasonally and some further minor gains are forecast. Naphtha cracks have begun to ease and should decline further. Gasoil cracks have held relatively firm, but lower demand should allow room for some easing, though turnarounds will limit erosion. Fuel oil cracks have improved with lower Asian stock levels being seen in January.

U.S. Commercial Stocks Increase

Overall U.S. oil commercial inventories increased the week ending February 7^th as crude stocks built and product inventories drew. The product inventory declined week-on-week and the decline was smaller than the prior week, largely due to a fall off in reported demand, while higher product output was offset by lower product imports.

Japanese Crude Stocks Build, but Finished Products Draw

In Japan, total commercial oil stocks were modestly higher with a build in crude outpacing a draw in finished products. Runs moved modestly higher as did the implied crude import rate, which led to the crude stock build. Gasoline demand was higher, perhaps influenced by the holiday, but exports fell back and stocks built slightly. Gasoil demand was lower, but held up rather well considering the holiday

EPA Issues Guidance for Fracking Using Diesel, With Little Likely Impact on Production

Final Permitting Guidance for Oil and Gas Hydraulic Fracturing Activities Using Diesel Fuels, was released on February 11th — more than a year later than initially expected. While PIRA believes implementation of the guidance will have limited direct impact on operations, their issuance provides additional insight into the Administration's approach to fracking — confirming their desire to have EPA engaged in the regulatory process while not imposing any serious obstacles to growth in production.

Crude Tanker Markets to Start 2014 Strong

Crude tanker markets are off to a strong start in 2014 with the Baltic Dirty Tanker Index doubling in mid-January from the end of November 2013 to its highest level since 2008. The improvement was driven by an exceptionally strong winter rally in Atlantic Basin Aframax trades. Clean tanker trades however, did not participate in the rally.

U.S. Market Moves Closer to Equilibrium

The extraordinary efforts undertaken to move propane from the USGC to the Midwest and East Coast have had the desired effect of easing the spread between Mt. Belvieu and Conway prices. The warming for the next week will certainly further help ease conditions as has price induced demand losses. Nevertheless, propane stocks will end the heating season at a quite low level.

Ethanol Production Rises W/W

U.S. ethanol output rose to a three-week high of 902 MB/D the week ending February 7^th from 895 MB/D during the preceding week despite soaring natural gas prices and rail car shortages. Inventories increased by 323 thousand barrels to 17.1 million barrels, the highest since July.

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.