Upfront, we collect a lot of data in real time and yet, we have to make certain assumptions. Such cells are marked in yellow for ease of reference.
On that basis, implied Russian crude production has reduced by as much as 1.5mbpd since January 2022 - a lot.
2/n
Who is buying less, who is buying more RUS crude?
OECD Europe buys 1.4mbpd less crude (sanction in Dec); Japan & Korea also down 250kbpd.
China up 100-150kbpd (little; they like diversifiction);
India up from 40 to 800kpbd;
Med Region up 150-200kbpd.
3/n
Note that other Asian buyers (ex China; India; Japan; South Korea) also reduced Russian crude buying (mainly Thailand left) likely because of their own economic contractions.
Meanwhile, neither Africa or Latin America can replace European purchasing power.
4/n
Production is for beginners, export logistics for the pros.
Let's look at logistics:
De Kastri in the Sea of Japan served Japan & Korean clients and is now "unemployed".
Nakhodka serves 800kbpd imports of China in Asia and is maxed out.
5/n
Net of Kazakh CPC crude exports at Novorossiysk, Russia therefore has to re-direct 2.5mbpd from West to East.
1mbpd does so already ($22 discount) which leaves 1.5mbpd to do same - hard.
With Asia contracting, IMHO only a China SPR restock can temporarily help.
6/n
But as I explained before, it does not need a price cap. The market did and will continue to do the work already.
OECD Europe also purchased 70% of RUS petroleum products.
That was convenient: EU's refinery system is historically "short" 1mbpd diesel, "long" 1mbpd gasoline.
But products may be even harder to re-shuffle -> EU bought 400kbpd less (Feb sanction) with little replacement.
8/
Asia doesn't need products. China has excess capacity while logistics matter here too.
95% of RUS products come out of Europe (Baltic Sea, some Actic). Which buyers will buy 800kbpd Baltic products I ask myself?
I don't see much re-shuffling here going forward either.
8/n
The world may lose up to 3mbpd crude & products come March 2023.
Some may be compensated by OPEC (not sure), some by reduced demand. Yet, it looks the physical market will be well supported - the last thing Fed/ECB want.
Inflation > rates up > stocks down. Buckle up!
9/n Thx
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India likes a "GOOD" deal - also in crude oil - and is about to teach Russia a lesson what that means.
Spoiler 1: it's not a pretty one!
Spoiler 2: China & Turkey will learn quickly..!
Let's look at the Indian-Russo crude oil bromance.
1/x Thread
Before the invasion in Feb 2022, Russia exported some 2.8mbpd (55%) of its 5.5mbpd crude to Europe by way of pipeline (Druzhba) & sea transportation (seaborne).
But not just crude oil...
2/x
Russia also sold products such as diesel or jet to Europe for a total of 1.4mbpd in petroleum product exports.
In other worlds, G7 sanctioned as introduced in Dec 2022 required 4.2+mbpd of crude & products to be re-shuffeled in globally. Big numbers!
For now, Red Sea disruptions due to Houthi attacking commercial vessels randomly remains a ton-mile story, not a crude oil story.
Within different shipping segments the picture of diverting cargo around the Suez Canal remains a Container Vessel story, to a less extent also a Product Tanker & Crude Oil tanker story.
Container Vessels owners have been the most consequent in diverting cargo.
Since Nov, the number of container vessels crossing the Suez Canal has collapsed by 80% in both directions.
2/n
Crude Oil tankers from the Middle East (Saudi Arabia; UAE; Iraq; Kuwait; Qatar or Oman) to Europe are also lower but our high frequency data does not yet show a similar collapse.
It also nicely illustrates how changing Russian crude flows (Urals diverted to India & China and away from Europe) have increased traffic through the Suez Canal - good for Egypt as Russian dark fleet vessels will or cannot seek an alternative route to ship oil from the Baltics to India.
Brazil is is an interesting microcosm to study in the oil industry.
It's a large, growing consumer of petroleum products. It's the 8th largest producer of crude oil in Dec 2023 as well as a large producer & consumer of biofuels.
Most importantly, it's energy agency reports the data in detail & timely (unlike most countries globally).
1/n
Brazil's resource wealth (mainly offshore) is well documented but it struggled for years to follow through.
Finally, it does with an exit rate of 3.9mbpd of oil production in 2023. Only the US, SA, RUS, CAD, IRQ, CN & IRN (incl condi; in this order) produced more that month. That's 50% growth since Jan 2018!
2/n
Better still, most such production growth reaches the international market. In Dec 2023, Brazil exported 1.7mbpd of crude oil - an ATH.
Remember, in oil net exports is the key number to measure.
Shall we look at the European NatGas market together?
Will Europe have to freeze this winter, after much mild weather luck last winter?
Will TTF drag coal prices up as last winter?
Thread 1/n
Our rolling forecast upfront for those of you with a little ADD:
Best-estimate today, Europe will exit the winter 23/24 in March at or around 40% storage levels (red line) which suggests TTF doesn't have to spike, ceteris paribus. Is it a bear? Neither.
Let me explain.
2/n
Natgas has unique characteristics for a commodity:
Supply is inelastic while demand is highly ELASTIC: Colder temps >> demand goes up exponentially & vice versa.
Not all demand is equal but heating buildings (HH & retail demand) is 65-70% of winter demand (Oct-Mar).
In 2023, BYD will sell some 3 million passanger cars, of which 1.5m will likely be Battery Electric Vehicles (BEV) & the rest Plug-in Hybrids (PHEV). At least that is what we see coming from tracking monthly figures.
2/n Note: table incomplete due to poor company breakouts
BYD's Chairman shared somewhat bigger sales targets recently. He hopes to "double last year's sales to 3.6 million units".