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

25 Nov
1. Seen a lot of paper traders telling Physical traders what they should do with regard to the SPR release and how much money they could make. $5/bbl seems to be the consensus level. On 1mb that is a cool $5m profit.

But sadly reality is not like paper trading.
2. Paper traders suggest you sell the prompt month you where you receive the crude oil and then buy back the month you need to return the crude oil to the SPR. Simple!!!!!!!

Not quite.
3. Lets take the costs on the physical transaction part.

First the easy bit. the cost charged by the SPR

For one year it is 3.9% to be repaid in extra barrels.

So 1mb received requires payment of 1,039,000bbls

Cost: $300k
Read 18 tweets
23 Nov
1. Thread

Now seen what Biden is doing, I have been hearing it is not enough, it is worse than expected, etc. But putting potentially 50 million prompt barrels in market is not nothing. It is 1/9th of total US commercial crude inventories and 3 days of US refinery throughput
2. It is 50 WAF cargoes, or 83 North Sea cargoes. In WAF terms that is equivalent to 1.5 Angolan programs and 1 Nigerian. These two programs are already finding it difficult to sell.

So to stuff that amount into a market in as little as 15 days is huge.
3. Now the argument that I have seen most this last week is about OPEC+ retaliation as if it was some level of equivalence. That by suspending their increases OPEC+ would put it to Biden. So let’s do the numbers.
Read 9 tweets
23 Oct
1. In Europe data showed that 19% of new cars are of Electric in nature. What is interesting is how that number is occurring.

In Spain, EV prices are not falling even with subsidies. What is happening is gasoline and diesel car prices are going up.
2. A Volkswagen Golf could be found for around €18k brand new before COVID, now lowers price is €23k. Dacia Sandero was €7k now is €8k.

It is happening across the board that new gasoline/diesel prices have risen while EV prices have remained static.
3. So what we are seeing is lower income people being forced out the new car market while those on higher incomes benefit from subsidies. So emissions are not going down, because the market is limited on who can pay the price for an EV.
Read 4 tweets
23 Sep
1. This is a good listen but the most important factor for the energy transition was barely mentioned which was the backup Energy system. This is the factor that will make or break the energy transition. A reliable back up system.
2. In a push towards renewables, it’s intermittency means a back up system is needed much more and also needs to be much bigger in size. The U.K. saw prices over $3000/ MWh and a significant factor was the loss of its wind generation system.
3. The U.K. has. a 20GW metered system but during the last 3 weeks it was producing less than 3GW. That means the back up system needed to be 17 to 20GW. This is far bigger than if the U.K. lost a nuclear power plant (biggest is 3.2GW) or a Gas Plant (biggest is 1.9GW).
Read 11 tweets
13 Sep
1. Thread: thought I would put all tweets in one place

Platts and Physical market analysts indicated today that they expect China to release much more from their strategic reserve than previously thought

The believe between 5 and 10 million tonnes (36 and 73mb)
will be released
2. That means before the end of 2021 100mbpd or more could be released from global strategic reserves into commercial inventories for refiners to use

China: 36-73mb
US: 20mb plus crude swaps
India: 4.3mb
3. Why is this significant? because strategic inventories are seen as off market unless an emergency. For China to release from their SPR to affect price suggests that Chinese strategic inventories have more in common with commercial inventories than traditional strategic ones
Read 12 tweets
6 Jun
1. Thread- The current narrative is crude Supply i.e. production is less than Demand therefore market is tight. This is the narrative put out by the IEA, OPEC etc. But it is wrong Supply is not equal to production and demand is not equal to consumption.
2.
Supply= production + change in crude inventories

Demand= consumption + change in product inventories

In between is refiners trying to balance these equations

Currently product inventory are building while crude inventory draw

Therefore production roughly equals consumption
3. In the case of crude oil a production is being augmented by inventories to equal supply while inventories are being used to store excess barrels of product.

It means the oil market is always in a supply and demand balance while inventories exist.
Read 25 tweets

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