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On the physical markets, immediate consumption requirements have moderated for now, due to refinery maintenance in Europe and Asia leading to a passive call on cargoes for prompt delivery.

23 Feb 2013

LONDON (Commodity Online): Global crude oil markets in 2013 are likely to be marked by healthy demand growth to the tune of 1.08 mb/d y/y and a non-OPEC supply profile that continues to lag (+0.51 mb/d y/y), stated London based Barclays in its latest weekly update.

This week the market saw a shift in directional momentum in crude oil. The first half of the week saw a pause in the upward drift, with the front-month Brent contract moving sideways around the $117/bbl range, while the latter half of the week saw prices edge lower. A combination of fading geopolitical headlines and shifts in macroeconomic sentiment has contributed to the weakness at the prompt.

OPEC output has also retreated from elevated levels last year, which has helped balance the markets’ requirements without contributing to a surplus at the prompt.

On the physical markets, immediate consumption requirements have moderated for now, due to refinery maintenance in Europe and Asia leading to a passive call on cargoes for prompt delivery.

Finally, in North America, the prompt WTI contract has drifted from five-month highs to $93/bbl, in response to headlines about operational volumes flowing through the Seaway pipeline.

In a filing to federal regulators, the operator stated that the pipeline continues to experience weaker-than-expected flow rates. Flows through the pipeline are expected to average 295 thousand b/d during the February – May 2013 period according to the filing.

The restricted throughput below the nameplate 400 thousand b/d capacity is a result of the requirement to carry a mix of heavy and light crude through the pipeline, with the former requiring more horsepower from pumping stations along the way.

Added to this, a combination of refinery maintenance (Philips 66 Sweeney refinery), restrictions on crude storage capacity along the Seaway route (Jones Creek), as well as bottlenecks with other pipelines in the region, have constrained takeaway capacity.

These limits have resulted in a build of 0.4 mb at Cushing, as seen in the latest EIA data, placing inventories at 50.6 mb (higher y/y by 18.5 mb); contributing to hold the width of the front month WTI – Brent differential above the $20/bbl mark.

 




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