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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Among others, it removes 0.8-1.0mbpd of PRODUCTION, bringing KSA back to a sustainable profile while it may not reduce OPEC EXPORTS as KSA/UAE/K consume less crude themselves in winter. Yet, it should keep the shorts in check.
I subscribe to everything HRH said. Media with brand names like @Reuters either hire the right journalists or do not deserve answers. Energy security is not a boulevard topic. Media outlets must understand their responsibilities in this too (underinvestment; climate hysteria).
Isolating its wind & solar generation (RES) for the month of Sept however reveals future challenges.
GER had 9 days in Sept with little #wind. Not just Germany, all of Europe. On avg, GER used 2.7GW of its 62GW wind cap.
That is a capacity factor of 4.5%. Ouch!
2/n
While Sept turned GER into an importer for 2d (from CZE, SWE & DK) to cover consumption (FRA couldn't help; coal maxed out), RES also required it to export excesses during 15d.
Its Energiewende already turned GER into an imp/export "junky" as d-s are tough to match.
The European electricity grid is a modern miracle. It is the largest synchronous electrical grid (by connected power) in the world. It interconnects 520 million end-customers in 32 countries, including non-European Union members such as Morocco or Turkey.
- Consumption: -12.2% yoy;
- RUS pipe imports: -48% yoy (inc. RUS LNG imports -42%);
- Local Production: +0.6% (Groningen could increase EU production by 10% alone within weeks);
- LNG imports: +70%.
- Net storage build: 45bcm!
- ITA, FRA, GER, POL or CZE have done a great job saving gas to fill salt cavities et al "whatever it takes style".
- UK cannot b/c it lacks storage;
- EE struggles to access more flows;
- EU covers 51 of 180 winter days (<2 months).
The European electricity crisis is deepens as it proves hard to save gas.
1) 🇫🇷 had to reduce nuclear output further due to high river temp (u can cool the reactor, but cannot let water back into the river to protect wildlife).
Result: Nuclear output (in MWh) collapses.
1/n
As I explained in the past days, 🇫🇷 has Europe's 2nd largest grid and was an exporter for as long as we can measure it. Not anymore.
In the context of the 🇩🇪 grid struggling too due to gas shortages, the list of issues gets longer by the week!
European electricity prices are spiking for all major economies except for Spain. But also Spanish consumers pay 3x more compared with only May 2021.
2/n
In fact, most European power prices are 12-15x higher than they were in 2015. Needless to say, the European industry will go into a deep recession at these prices.