NYC-based PIRA Energy Group reports that U.S. demand growth was only 0.3%, but distillate and kero-jet demands were very strong. On the week, U.S. stock deficit widens in spite of commercial stock build. In Japan, crude runs eased with continuing low crude imports such that stocks posted a moderate draw. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:
March DOE Monthly Supply/Demand
DOE released its final monthly March 2014 (PSM) U.S. oil supply/demand data today. Demand came in at 18.53 MMB/D versus the 19.10 MMB/D PIRA had assumed in its balances. Compared with the weekly preliminary data, total demand was revised downward by only 14 MB/D. While demand growth was only 0.3%, or 50 MB/D, distillate and kero-jet demands were very strong, aided by colder-than-normal weather and colder weather relative to last March. End-March total commercial stocks stood at 1,057 MMBbls. PIRA had assumed 1,052 MMBbls in its balances. Crude stocks came in 7.6 MMBbls lower than PIRA assumed, while products came in 13.2 MMBbls higher.
Stock Deficit Widens in Spite of Commercial Stock Build
Total commercial stocks built for the week ending May 23, although the three major light products drew, reflecting strong pre-holiday-weekend demand. A surge in imports drove crude stocks higher, and all other oils built collectively. With a much larger total stock build last year, the year-over-year stock deficit increased. As noted last week, the effective stock deficit could be even larger, with approximately 9.5 million barrels of crude operational stocks for new infrastructure this year versus last.
Japanese Turnarounds Continue
Crude runs eased with continuing low crude imports such that stocks posted a moderate draw. Finished products also drew. Demands were only slightly changed, with a small stock build in gasoline, a small draw in kerosene, and larger draws on fuel oil, gasoil, and notably naphtha.
LPG Scorecard
Stronger demand and favorable arbitrage economics for LPG exports will be counteracted by ever increasing U.S. LPG inventories. Lower demand in Europe will keep LPG prices within range, while Saudi loading delays, higher contract prices, and less spot Middle Eastern volumes will be supportive for prices in Asia.
Ethanol-blended Gasoline at an All-time High
U.S. Ethanol-blended gasoline manufacture soared to a record 8,980 MB/D the week ended May 23, eclipsing the previous high of 8,957 MB/D set earlier in the month. U.S. inventories increased by 499 thousand barrels to an annual high 17.5 million barrels.
Prices/Margins Rise in May
U.S. ethanol prices increased during May as consumption in gasoline soared to a record high, while inventories in the Midwest are at the lowest level of the year. After declining for six consecutive weeks, manufacturing margins rose, with lower corn costs adding to the improved economics.
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.
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