Weekly Oil Market Recap for the Week Ending January 4th
PIRA Energy Group's Weekly Oil Market Recap for the Week Ending January 4th, 2015
NYC-based PIRA Energy
Group believes that it is too early to get long oil. In
the U.S., the stock surplus jumps. Specifically, PIRA’s
analysis of the oil market fundamentals has revealed the
following:
It Is Too Early to Get Long
Oil
The bulk of the first-half
2015 inventory builds will be in crude oil. As crude
inventories build, more expensive storage will be required,
which will relatively weaken prompt prices; that is, widen
the contango. This can only be mitigated by an increase in
inventory demand from currently depressed levels. PIRA
believes that such an increase in demand is unlikely to be
strong enough to offset the weight of the impending increase
in inventory supply. In such an environment, it is very
difficult for prompt crude oil prices to rally.
U.S. Stock Surplus
Jumps
The global imbalance
between supply and demand compared to last year is vividly
apparent in the U.S. stock data. From a 9 million barrel
excess in 2013, beginning the fourth quarter, it has now
expanded to 85 million barrels as of December 26. This is an
increase of around 10 million barrels versus the week
earlier. 2013 stocks decreased this past week while in 2014
they increased. Crude stocks are now 25 million barrels
higher than in 2013, having begun the quarter 7 million
barrels lower. From deficits last year beginning the fourth
quarter, gasoline and distillate stocks are now
higher.
Latin American Oil Market
Report
Latin American refinery
runs will increase in 2H15 driven by the startup of a new
refinery in Brazil and the restart of revamped capacity in
Colombia. Latin American product imports will level off,
breaking the growth trend of the last few years. The U.S.
will remain the primary supplier of products for import into
the region.
Closed U.S. Refineries Contribute to
Overall Downtime
Permanently
closed refineries in the U.S. have had a significant affect
in lowering crude run demand and subsequent gasoline and
distillate production.
India Quarterly Oil Demand
Monitor
India’s recent
economic performance was somewhat disappointing, as GDP
expanded by an estimated 5.3% during 2014. Growth prospects
have improved, however, as lower oil prices will allow
households and businesses to increase spending and the
central bank to loosen monetary policy. Vehicle ownership
continued to rise, in spite of stagnant sales. End-user oil
prices dropped sharply in recent months, including those for
diesel. PIRA projects a moderate oil demand increase of 130
MB/D (3.3%) for 2015. But upside potential is significant,
given how declining prices boosted India’s oil demand in
the past.
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.