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PIRA Energy Group's Weekly Oil Market Recap for the Week End

PIRA Energy Group's Weekly Oil Market Recap for the Week Ending August 4th, 2013

NYC-based PIRA Energy Group believes that Chinese oil demand growth subdued so far in 2013, but will soon turn the corner. On the week, U.S. stocks built after four weeks of draws, while Japanese crude stocks drew. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:

Chinese Oil Demand Growth, Subdued So Far in 2013, Will Soon Turn the Corner

China’s reported oil demand growth was relatively weak in the first half of 2013, but a major pickup is projected for 2H13.  Because of last year’s large stock declines (which reduced the need for imports), there will be a substantial year-on-year increase in China’s crude imports.  Further, physical oil demand indicators that can directly be tied to oil demand have shown resiliency of late, which bodes well for the future. Economic growth has slowed, but the government indicated that it will step in and act if 7% GDP growth becomes difficult to achieve. 

A Modest U.S. Stock Build After Four Weeks of Draws

Overall commercial stocks in the United States increased for the week ending July 26 with both crude and product stocks building. This modest inventory increase came after four consecutive weeks of stock decline. The month of July will show the first U.S. inventory decline in five years according to the weekly data and this will also be true for the three major OECD markets. It is also consistent with PIRA's recently published global market balances. 

Japanese Runs Rise, Crude Stocks Draw, Margins Ease

Runs rose on the week and imports stayed low, such that crude stocks drew moderately and accounted for all the change in total commercial stocks. Gasoline demand eased with higher yield and stocks built modestly. Gasoil stocks remained near multi-year lows. Refinery margins took a moderate hit this week with light product cracks easing, most notably gasoline and naphtha. Fuel oil cracks also eased modestly. 

Chinese Importing More LPG

Chinese LPG imports in June surged to the highest level for any month in years. Imports were up nearly 50% from May 2013 and over one third higher than last June. Aside from the incentive of lower prices motivating imports, the impending start-up of propane dehydrogenation plants (PDH) is also pulling more LPG into the country. 

RIN Prices Jump to $1.44

During July, U.S. ethanol prices fell to the lowest level in about six months primarily due to downside pressure from plummeting corn costs. Manufacturing cash margins increased early in the month, but declined last week as stocks built. RIN sanity returned in July as the volatility came back. 2013 D6 RINs, essentially for grain-based ethanol, began July at $1.03 and jumped to $1.44 by July 17 due to aggressive buying by obligated parties.

U.S. Ethanol Output Drops

U.S. ethanol manufacture declined sharply the week ending July 26 as plants are reducing output due to dwindling corn supplies. Production was 832 MB/D last week, down from 881 MB/D at the beginning of the month. Inventories fell by 804 thousand barrels to 16.5 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.

Click here for additional information on PIRA’s global energy commodity market research services.


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