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I don't have blind faith oil will stay strong, and I acknowlede the oil market is rightly considered as somewhat opaque. There are two factors giving me confidence:

1) Crack spreads (record highs)
2) VLCC rates (near record lows)

#OOTT #COM #EFT $XLE $XOP $OIH $CL_F
So first on crack spreads. This is your sanity check on "is demand destruction occurring". The crack spread is the difference between the price of crude and the price of products like gasoline and diesel. At incredible, historic, world beating levels.

What does this imply?
Basically, that refineries have zero incentive to slow down. They cannot meet consumer demand. So fuel margins are at record highs. As long as this persists, refiners, the main buyer of crude, have a historic incentive to not only buy, but to bring more capacity online. Anything.
Read 9 tweets
Thread: What are the Biden Administration’s choices to reduce oil and fuel prices? #OOTT #Oil

1- What has been done?
Asked OPEC members, US oil producers & refiners to increase production. All failed.

OPEC members were not interested. US producers & refiners cannot do so.
2- What are the current choices?
a- Restrict crude oil exports
b- Restrict fuel exports
c- Suspend environmental regulations temporarily
d- Suspend federal fuel tax
e- Remove sanctions on Iran & Venezuela
f- Resurrect relations with Saudi Arabia
g- Withdraw more from the SPR
3- None of the choices above can reduce shortages or lower prices meaningfully before the US mid-term elections. Only a recession would reduce fuel prices and allow for inventories to rise.

Regardless, a recession might flip both houses to republicans. Democrats are stuck!
Read 23 tweets
The energy shellacking continued today, but looking across the market, the action is actually fairly consistent (more in the thread below).As/when the industry puts up sustained cash flows, this selloff will look way overdone - but who knows if its over yet!?!? #EFT #OOTT
Market action says recession coming, interest rates won't go up as much as you think, inflation will moderate. Examples:
1) bonds up, yields down
2) commodities softening - not just oil - wheat, copper, etc (why? expectations of demand softening)
3) Nasdaq outperforming (lower rate expectations means higher NPVs)...$ARKK names the best example with many up double digits today
4) Consumer sensitive names getting smoked (airlines, hotels, retail, etc)
Read 15 tweets
Quick thread on White House address on gas tax holiday. Thanks for pulpit today @PowerLunch and Tyler Mathisen - so much more to say. Key point - "we're doing everything possible" is simply NOT the case. Much more is possible.

More below, #EFT #OOTT
Recap of Biden statements:
1) Proposing Fed gas tax holiday - 18-24c/gal, 2) request states also waive (20-30c/gal),
3) Refine more oil
4) US production will be a record next year
5) OPEC+ adding supply
6) Gas stations need to pass along lower prices
7) Putin's fault = +$2/gal
Jon Gollub CS - Unfortunately, many of these policy prescriptions lower near-term prices but leave longer run inflationary pressures in place.While politically expedient, these efforts encourage additional spending.They also undermine decision making by obfuscating price signals.
Read 16 tweets
⚡China's most-traded coking coal, coke, iron ore futures extend declines at night opening. Coking coal down 4.3%, coke down 3.8%, iron ore down 3.7%.
#coal #ironore #CoalTwitter #China
⚡Shanghai non-ferrous #metals fall at market open, #tin down 2.3%, #copper down 1%.
⚡Shanghai low sulfur fuel oil futures dop 1.7%, fuel futures down 1.6%, crude oil futures down 1.4%. #OOTT
Read 6 tweets
🇰🇿🇷🇺Russia suspends the shipment of Kazakh oil.

This is reported by Kommersant:

🔳The reason: 50 WWII mines were found in the water area of the Caspian oil pipeline

🔳They'll be neutralized by the end of the month

@CeyhunAsirov #oott ImageImage
🔳The #CPC #oil #pipeline system is the largest route for transporting oil from the #Caspian Sea to world markets

🔳A 1.5 thousand kilometer long main pipeline connects the fields of Western #Kazakhstan with the Black Sea #oott Image
Currently, there is no alternative for Kazakhstan, but Baku-Tbilisi-Ceyhan was offered to Kazakhstan and Turkmenistan, but it was not done because they were afraid of Russia

President Tokayev spoke at SPIEF 2 days ago & he made clear his refusal to recognise LPR/DPR independence Image
Read 4 tweets
Here's some reality on the prospect of a US international export ban. First, let's consider what the main US exports are:

Diesel, gasoline, propane, and other oils (like lubricants and additives).

If the US blocks exports, it will *devastate* the world economy.

#OOTT
We send a lot of diesel and gasoline to Mexico, Canada, Netherlands, Brazil, Venezuela...

We send a lot of Naphtha to Japan and Europe. Below is a visualization of clean tanker charters headed to other countries, from my shipping data production Marhelm:
On balance, most US exports (including crude) are going to Europe and Asia (figures below, again, are from my product, which bases stats on fixture data obtained from ship brokers, ship owners, and charterers).

Basically, we supply both crude and product to everyone.
Read 11 tweets
A few thoughts #EFT #OOTT

Seems like old times...the bad old times. The yucky market finally caught up with oil and energy stocks. WTI went from "so good its almost bad" in the $120's to "still darn good but falling like a knife" in the $110's. XLE -20% since last Wednesday.
Let's not forget natty. The cool new kid at the party wound up puking in the bushes - dropping from $9.30's to $6.90's (-26% for those scoring at home).

To what do we owe this nasty behavior? Well, risk off is the easiest and most obvious answer. Everything's ugly.
If the popular wisdom was "tech can't bottom until big tech cracks"...then maybe we say "the market can't bottom until the best performer - energy - gives some back". This week people sold winners (energy, oil, gas) and losers (lots of other sectors).
Read 18 tweets
A few of the world's largest cities. Where is the demand destruction, again?

#OOTT
Flight stats...2022 is tracking ahead of 2019 levels for total flights. Commercial flights are behind 2019, assuming the balance is being made up by mostly increased military activity (which btw, fighter jets burn a LOT ton of fuel - which $INT sells)
Rotterdam bunker sales 16% higher in Q1-22 than Q1-21
Read 6 tweets
BREAKING: Global oil demand growth will **accelerate** to 2.2m b/d in 2023, up from 1.8m b/d in 2022, the @IEA said on its first look into next year's S/D balances.

"Global oil supply may struggle to keep pace with demand next year," the IEA said | #OOTT #ButTheRecession
As as last month, the @IEA report is full of dire warnings. Global energy policymakers can not say they weren't warned: the second half of 2022, and the full of 2023 look very, very difficult. The IEA doesn't send this warnings that often - pay attention | #OOTT
And ICYMI, this is my @opinion from Monday, warning that the 2022 oil shock was going to roll over into 2023 (as the IEA confirmed today) | #OOTT bloomberg.com/opinion/articl…
Read 4 tweets
1-5 Now it is official: President Biden to visit #SaudiArabia on July 15 and 16, during his Middle East tour.
After meeting with the Saudi leadership, he will meet with the leaders of what some experts call “the Arab NATO”: GCC leaders, Egypt, Jordan, (& Iraq). #OOTT #COM #EFT
2-5 Oil is not among top issues given the importance of security issues in the region. My guess is that Saudis are more interested in highlighting their climate change plans & efforts while showing that they actually have been increasing oil production & will continue to do so
3-5 While mega commercial deals are expected, nuclear deals will attract media attention. Saudi Arabia, in its carbon reduction efforts, needs nuclear energy. It remains to be seen if Saudis will continue to invest in the US refining sector
Read 5 tweets
Now let’s talk about the oil price. Biden is blaming the oil industry for the high prices he said “Exxon made more money than God” this year and aren’t drilling/ investing to keep prices high. #OOTT #US
First of all, investing in upstream today doesn’t mean that you immediately get an increase in capacity it takes time. Previous pressure to speed up the energy transition also prevented funding to reach the upstream industry. #OOTT
Will adding more oil now bring down prices? I don’t think so. The market at the moment is facing a oil products crisis, limited refining capacity and that’s why prices are high at the pump. #OOTT
Read 5 tweets
UAE energy minister: Situation is not encouraging when it comes to quantities of crude OPEC+ can bring. We have seen the conformity of the OPEC+ group and the conformity is more than 200%. Risk for oil market is when china demand recovers.
#OOTT #OPEC
UAE energy minister: Talking with our friends in Germany and others if they are interested in our natural gas. #ONGT
UAE energy minister says crude prices 'nowhere' near peak yet. #OOTT
Read 3 tweets
"International Energy Agency warns against investing in oil & gas production" #EFT #OOTT @TwainsMustache @EnergyCynic

seekingalpha.com/news/3841822-i…
In a curious statement at the World Economic Forum in Davos, the head of the International Energy Agency said, "my worry is that some people may use Russia's invasion of Ukraine as an excuse for a large scale, new wave of fossil fuel investments." Noting that,
"one of the reasons that we have such high prices is the heatwave which is a result of climate change." An interesting statement, given NASA's Global Land-Ocean Temperature Index just measured it's lowest annual reading since 2014. Even before Russia invaded Ukraine,
Read 12 tweets
White House on the diesel crunch:

“We're closely monitoring challenges to diesel supply and prices as a result of Putin's invasion.”

“An emergency declaration has been prepared for @POTUS to authorize a release from [diesel] reserves if necessary.”

#OOTT via @EmilieSimons46
For background, read my @opinion column about the diesel crisis in the US East Coast. While Putin’s invasion of Ukraine is, as the White House says, a factor, probably more important is the huge reduction in East Coast oil refining capacity | #OOTT bloomberg.com/opinion/articl…
Why is diesel so important? The fuel is the workhorse of the global economy. It keeps trucks and vans, excavators and heavy machinery, freight trains and ships all buzzing | #OOTT @opinion
bloomberg.com/opinion/articl…
Read 3 tweets
Short thread: As China reopens, oil prices may NOT increase!
1-4 Will oil prices increase as #China opens up?
a- It depends on how the increase in demand is met: If China uses the SPR that was built in recent weeks, then the impact on prices is limited.
#Oil #OOTT #COM #Rusia
2-4
b- If China increases imports, prices might increase as long as the imports are from countries other than Russia. If crude inventories start building up, Russian discounts will start affecting prices globally, especially if competition for market share in China heats up
3-4
c- The most likely scenario is a combination of all the above, leading to a very limited increase in prices.

d- In case of a recession in the US or EU or both, reopening in China will NOT increase oil prices.
#China #Russia #OIl #OOTT
Read 4 tweets
European Commisison Unveils Plan to End Reliance on Russian Gas, Oil and Coal by 2027.
#OOTT #ONGT #EU #Russia
European Commission: EU Needs 210 Billion Euros in Extra Investments by 2027 to Exit Russian Gas, 300 Billion Euros by 2030. Ask Countries to Revise Plans to Spend More Covid-19 Recovery Funds on Quitting Russian Gas.
#OOTT #ONGT #EU #Russia
European Commission: Those Investments Include 113 Billion Euros for Renwables and Hydrogen Infrastructure, 29 Billion Euros for Power Grids, 56 Billion Euros for Energy Savings and Heat Pumps, 10 Billion Euros for Lng and Gas Investments, 1.5 to 2 Billion for Oil by 2030.
#ONGT
Read 5 tweets
CHART OF THE DAY: American wholesale gasoline surged today above $4 a gallon for the first time ever.

This is the longest chart we have on @TheTerminal for US wholesale gasoline. It's nominal and reflects the Gulf of Mexico prompt market for 87 octanes conventional gas | #OOTT
As many of you asked for a real, inflation adjusted chart. The below is the same (US wholesale gasoline, GoM 87 octanes conventional), but adjusted by US urban consumer price index
And here some background on why gasoline, diesel and jet fuel prices are surging much higher than those of crude oil: the key is refining | #OOTT bloomberg.com/opinion/articl…
Read 3 tweets
JUST IN
Retail sales -11.1% y/y [Est.-6.1%, Prev.-3.5%]
Industrial value-added -2.9% y/y [Est.+0.4%, Prev.+5.0%]
Jan-Apr Urban fixed investment +6.8% y/y [Est.+7.0% Prev.+9.3%]
Urban surveyed unemployment rate +6.1%[Est.+5.8% Prev.+6.0%]
#China #EconTwitter 🇨🇳 1/n
In April, #China's total retail sales were recorded at 2.95 trillion yuan, down 11.1%y/y or down 0.69% m/m.
Among them, retail sales of goods were 2.69 trillion yuan, which declined by 9.7% y/y; The total revenue for the catering industry was 260.9 billion yuan, down 22.7%.
2/n ImageImage
#China's January-April #realestate development investment fell by 2.7% y/y to 3.9154 trillion yuan.
Residential housing sales areas dropped by 20.9% y/y to 397 million square meters, and the total sales dropped 29.5% y/y to 3.7789 trillion yuan. 3/n ImageImage
Read 6 tweets
🧵on U.S. distillate (diesel) markets #OOTT

Long story short - the U.S. East Coast had a large part of it's import blanket pulled out from under it.
Looking at the PADD1 distillate supply/demand balance we can see that as in-region refinery production decreased due to refinery closures, PADD1 first relied on receipts (pipeline/tanker/barge) from other PADDs.
As the pandemic hit, (early 2020) the East Coast was inundated with supply up Colonial and Plantation Pipelines but then those receipts fell to around 600kb/d, until about Q3/4 of 2021.
Read 14 tweets
Prices send signals to both supply and demand like a ringing phone. One of the two typically pick up. For many reasons, supply is not available, but the phone is still ringing, sooner or later demand has to answer. #OOTT
U.S. on-highway diesel prices are crazy high on a nominal basis, but we've still got a ways to go before we match the highest real prices from 2008.
This is key, the year-over-year change in real diesel prices this time around is higher than it was back in 2008... But that's comparing peak 2008 to now, we still don't know when diesel prices will come down.
Read 3 tweets
Crude oil mkt: Below are some of the main catalysts we are watching

Anything to add? Let me know

There is still a lot of uncertainty, but risks may still be skewed to the upside #OOTT

Thread 1/9
2/9 Lockdowns in China is arguably the biggest headwind for oil prices right now - but these won't last forever (right?)

Rising interest rates and weaker macro backdrop also a headwind

But a shortage of oil could keep prices elevated #OOTT
3/9 An EU oil embargo on Russia appears to be around the corner. Some are arguing that these may disappoint - so that's bearish? The way I see it is there is likely to be more disruption to Russian oil flows, not less. This is already a tight market #OOTT
Read 9 tweets
Thread of news items related to #NOPEC
#OPEC #OOTT #COM #Oil
1- Trump calls on Russia and Saudi Arabia to cut oil production
politico.com/news/2020/04/0…
2- Trump told Saudi: Cut oil supply or lose U.S. military support - sources
reuters.com/article/us-glo…
3- OPEC and allies’ oil production cut is Trump’s ‘biggest and most complex’ deal ever: Dan Yergin

cnbc.com/2020/04/13/ope…
Read 6 tweets
Summary of Pierre Andurand's recent interview with Raul Paul. Long interview but these are the comments about oil.
🧵
#OOTT
Andurand: I studied math/finance. Started with Goldman Sachs, trading energy. Then BofA. Then Vitol. Started hedge fund in 2008 (large commodity fund). Then another fund in 2013. Mainly focused on energy trading. For last 5 years I've been based in Malta. #OOTT
Paul: Yield curve inverted, it looks like we might be heading into slower growth period, and that's going to make things a lot more difficult. How are you looking at it from macro perspective? #OOTT
Read 21 tweets

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