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Big_Orrin Profile picture
@Big_Orrin
Sep 24, 2020 • 10 tweets • 2 min read • Read on X
1.
Had a few comments about me asking whether peak supply may come before peak demand. So I thought i would write in more than one tweet what my theory is. And it is only a theory.

#OOTT
2. Over the last 6-7 years investment has been low and we have not seen its effect yet. Shale growth covered the demand growth but other projects covered the loss of crude oil as fields started to age and degrade.
3. The lack of investment means that at some point he projects needed to cover the degradation and ageing of fields will just not be there to cover these losses. Shale will grow but shale was a very specific period of time due to capital availability.
4. Shale will grow again but it will be limited by the price of natural gas, NGL’s and capital not just the oil price (see @anasalhajji ).Therefore, before any new production can catch up, oil supply would create a supply hump where some later years will be lower than earlier one
5. In normal times the supply hump would mean supply does not meet demand and inventories are drawn down. It would also mean prices would go up and bring more investment in and the supply curve after a dip would continue to go up.
6. But this is not normal times. There is an energy transition going on and everybody expects a peak demand to be reached. The one thing that will bring peak demand forward is high oil price.
7. Therefore, the lack of investment and ageing fields over the last 7 years or so, may create the situation that brings peak demand forward. Therefore the supply hump actually turns out to be the peak supply.
8. In other words an unexpected peak supply comes first and creates peak demand.
9. Add into the fact many of the usual players that would be developing oil fields are backing out of e&P and there leaves a gap from who will fill it. BP, Shell are all moving towards the energy transition and NOCs don’t have the money. Will take time for new players to enter
10. The problem is that time is the great problem. There may not be the necessary up to 10 years needed to bring some of the more difficult sources of oil online before peak oil.

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More from @Big_Orrin

Big_Orrin Profile picture
Mar 18
1. Short 🧵on what will be the most overhyped flop in the oil market.

The answer is the Trans Mountain Pipeline.

Canadians think this will have the effect of increasing demand for Canadian crude oil, putting up the differential and make Canadian producers more profitable.
2. There is significant problems in that idea.

Main one is it might create too much supply for demand. Here are the problems.

- The crude is very heavy has huge amounts of sulphur but worst of all most will have aTaN of between 1.6 and 2.2.

Few refineries can refine that
2.
 The problem with acidity is where it comes out in the refinery. That acidity number will increase as the crude is seperated. Because this is very heavy crude, the light crude it is blended with will not help disperse the acidity.
Read 11 tweets
Big_Orrin Profile picture
Mar 16
1. Short 🧵

Remember Ukrainians are not reducing Russian revenues hugely at moment. More crude oil exported will balance less products.

- But it is doing medium/long term damage to Russian infrastructure at a time where all skilled workers are working in the military complex
2.
- being done at a time when refineries already under strain because of sanctions (quality of spare parts, catalysts, etc.)
- Russia does not have ability to import products in the quantity to replace lost refinery capacity. The Russian system is designed to export not import
3. Ukraine has been restrained against Russian oil and gas until lately
- Both gas and oil pipelines running through Ukraine carrying Russian hydrocarbons have been untouched
- Ukraine not used their aquatic drones against tankers (full or empty) unlike success against warships.
Read 11 tweets
Big_Orrin Profile picture
Mar 12
1. Short 🧵

One factor to watch is US Crude oil export growth

US refineries have shown US shale absorption has reached saturation levels. The same will happen outside US. Refineries can only handle a maximum volume before capacity restraints.
2. The capacity restriction is caused by the lightness (high API ) of shale. Shale contains much higher levels of Light ends than does an Arab light, urals and also a far lower amount of residue.
3. The throughput of a crude distillation column is not determined by the volume of crude coming in but rather by the maximum amount of products it can produce. Each product draw point has a maximum amount that can be produced.
Read 12 tweets
Big_Orrin Profile picture
Feb 25
1. Long boring thread🧵

This is interesting in the FT about changing the way the SPR is being run and develop a similar system for energy transition threads.

Let’s talk about the SPR and the what it should look like in the 21st century.
2. Despite being the World’s largest oil producer the U.S. has such a paranoia over energy embargoes and what happened in the 1979s that a true discussion can never happen without that paranoia creeping in.

But the U.S. really needs to re-think how it uses its SPR.
3. That paranoia is seen with the release from the SPR during 2022. A potential loss of Russian oil and prices spiking to $120+ was not enough for many to release from the SPR. The paranoia is always that something worse will happen later. There is always the worry of the embargo
Read 25 tweets
Big_Orrin Profile picture
Feb 7
1 Short thread on something @crudegusher said in his video today

Average energy consumption of a BEV is about 0.32kWh per mile

Average distance driven in US per year is 13,476 miles. That 36.9miles per day

Therefore, an EV uses around 11.81KWh per day or 4,300 per year
2.
The Nvidia H100 AI GPU consumes 700w at peak power. More than a typical US Household.

At the typical 61% utilization point specified by NVidia that is 3,740kWh per year. That is nearly the same as an Electric Vehicle

Except you can fit 18 of these into a shoe box.
3.
NVidia expect to sell 2 million in the US alone. It means that NVDIA AI chips will require more power than the expected extra electricity demand from new EV sales in 2024.

Like most server chips performance increase will mean electricity demand will not fall too much.
Read 4 tweets
Big_Orrin Profile picture
Jan 4
1.
A quick thread on how european buyers use their Long Term Contract with saudi Arabia.

Saudi Long term Contracts in Europe are falling. European refiners see Saudi Arabia prices being way to high compared to the actual value of their crude oil.
2. there is a reason they are expensive and that is Saudi using it to limit demand for their crude during period where they are cutting production to try and force prices up.

But this means European refiners see Saudi as a less dependable supplier.
3. this suits Saudi as well as they can focus on the Far east markets.

For European's market structure becomes just as important as how much they can minimise the volume they take on the long term. This is where cheapness comes into play and dates of loading come into play.
Read 10 tweets

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