U.S. sees largest weekly crude stock build of the year at inopportune moment for oil prices, while Japanese crude stocks drop

NYC-based PIRA Energy Group reports that the largest weekly U.S. crude stock build of the year came at an inopportune time for oil prices, while Japanese weekly crude stocks fell. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:
 
Largest U.S. crude stock build of the year.  The huge reported U.S. stock build for the week ending March 30 came at an inopportune time for oil prices. Risk markets in general are taking a hit from the recent Federal Reserve meeting and fears that Europe is sliding into another debt crisis. Meanwhile, the liquidity injections by Central Banks around the world are working.
 
Japanese crude stocks drop week-on-week.  For the week ending March 31, crude stocks dropped after jumping the prior week. The implied crude import rate fell from a very high level and fixture data indicate that import rates should remain contained. Refinery runs did not contribute to the crude stock draw as they fell week-on-week.
 
IEA’s Libya Collective Action Revisited.  Around this time last year, the energy world was focused on the loss of light sweet crude oil due to the hostilities in Libya. This year, the focus is on the potential loss of medium sour Iranian supplies as nations participate in trade sanctions against Iran. While most of the Iranian oil will likely be replaced by Saudi Arabia, discussions are underway again about the potential use of strategic stocks.
 
LPG stock positions affect prices.  In the U.S., excessive stock positions for ethane and propane will keep prices relatively weak. In Europe, robust demand from petrochemicals and a perceived shortage of prompt supply are supporting prices, which will attract cargoes from Africa and elsewhere. The transition at this time of year gives companies time to develop inventory control strategies, particularly in Asia. The market will take its cues from crude price developments. Any potential risks to the Straits of Hormuz will invite prompt buying.
 
U.S. Ethanol Prices Volatile.  U.S. ethanol prices were volatile during the week ending March 30, tracking the gyrations in corn futures prices. The cash manufacturing margin for PIRA’s model plant based on Chicago prices declined. Ethanol production was at a six-month low for the week ending March 23, but inventories remained near record levels. The incentive for blending ethanol rose to the highest value for some time. The EPA approved 20 applications to sell E15, a major step towards the fuel’s commercialization. Brazilian ethanol prices rose.
 
U.S. ethanol production declines week on week.  U.S. ethanol production fell to a six-month low the week ending March 30, declining to 873 MB/D from 889 MB/D during the previous week. Output is down 9.3% since peaking at 963 MB/D during the final week of 2011. Stocks fell by 75 thousand barrels to 22.6 million barrels. PADD I inventories reached record levels for the fifth consecutive week, mostly due to the 9 MB/D imported into the region. Imports have not been reported in any other PADD so far this year. The output of ethanol-blended gasoline rose to 8.169 MMB/D, up 86 MB/D from the previous week, as total gasoline production increased and the blending incentive improved.

Source: Pira