1. Quick 🧵why you cannot run the same amount of light crude in a refinery that is designed to run medium or heavy crude. Why US need sCanadian and cant run US crud eoil.
The problem is the overhead system cannot take the volume of light ends that are produced.
2. It all starts in the pipework that takes the light ends from the distillation coilumn to the downstream secondary units.
The most important factor that this overhead pipework is designed to do is to minimise the pressure drop between the CDU and downstream
3. Now if you introdcue more lightends by running light sweet crude instead of heavy sour. There are more light ends than normal. To get the extra out of the column you need one of two things to happen
4. The first is higher pressure in the column to compress the extra amount which is a gas down the line.
Now the top of CDU is designed to run ajust above atmospheric pressure at the top of the column. This is done because at low pressure seperation is much easier to acheive.
5. The higher the pressure the cut points of products changes and is much more difficult to achieve product quality
Compressing also means temperature of the gas gets higher which makes it more difficult to cool to storage temp in the heat exchanger downstream
6. The second way to get more out of the CDU is by increasing the velocity in the pipe, i.e. make the gas move faster.
the problem with this is the faster a liquid(gas goes the more pressure drop it has per metre of line. This means again you need a higher pressure in the CDU
7. It also means that not only is it hotter leaving duue to a higher pressure, the gas will also stay less time in the heat exchanger to cool. resulting in the same problem as with compressing.
8. This is why crude quality is such an important factor in a refinery and why if outside the upper bounds of the light crude in the blend, the throughput capacity of the column falls
It is why, you cannot swap US shale for Canadian Oil sands
US oil independence is a myth
9. yes you can spend millions to upgrade your overhead system. But it also means changing your downstream equipment as well. In old refineries this may not be feasible. It will also take years to change
So, please Americans, stop telling me you can use US oil instead. You cannot
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1. Why Trumps “drill Baby Drill” is actually not great for US crude oil producers.
I keep posting this graph and there is a reason why I do. It shows that demand for U.S. crude oil particularly light sweet crude oil is not growing. Actually in 2024 it is actually falling.
2. The reason it is all about crude oil quality and the ability of refineries to run it without compromising its throughput. It is all to do with the first important piece of equipment the crude distillation column.
3. When a refinery is designed it maximum throughput is designed using a base quality of crude oil. Much of the Med refineries are designed to run urals or Arab light crude oil or the blends that mimic them.
- Trumps “ Drill baby Drill” likely has little effect. U.S. production likely unaffected by either candidate too much. Any costs Trump saves producers will go to bottom line rather than huge increases in production
2.
- Any increase in US production would mean it has to be exported. But the market is already long light sweet crude especially in the Atlantic basin. So demand may just not be there either.
3. - Harris will look for a new JCPOA with Iran. Trump will likely increase sanctions but ask OPEC to cover.
- Harris likely to increase secondary sanctions regarding Russia. Trump likely removes them. Hates China benefitting. Would leave Atlantic Basin even longer.
If you are an equity cargo holder within Brent Complex, yoou will have one or more of the following cargoes Brent (physical), Forties, Oseberg, Ekofisk, Troll or WTI MEH cargo. Known as BFOET
2. You have two options up until 32 days (taking 31 days in a month as fixed) before the first day of loading of the cargo
- You can keep it i.e. Put it in your refinery or sell it as a Dated Related Cargo later
- Or you can put it in the Chains systems.
3. What is the Chains? Well it is the basically the selling of a cargo via Forward contract at fixed price via 3 basic methods
- Brent Contract (700kb cargo)
- 7 partials contracts (100kb each) bought from or sold to same counterparty
- EFP (Exchange Futures for Physical)
1. Why an attack against Iran refineries would make more sense than against Export facilities. Putting together a number of my posts
Iran produces 3.9mbpd of crude and condenstae and refines 2.6mbpd according to the Energy Institue Statistiacal Review of World Energy (ex-BP)
2. So Iran exports 1.3mbpd of crude oil and condensate and its biggest weakness is that it has only one real buyer and that is China. Even India does not touch it.
So if Israel attacked Kharg island it would remove 1.3mbpd from the market China buys from
3. However, China has been importing 1.11mbpd that has gone directly to inventories in 2024. That is just excess buying. Losing Chinese crude oil and condensate would just mean China's inventories would be flat
1. Why global diesel demand worries me. Sorry it si a bit of a long thread
Diesel has always been the balancing barrel in a reifnery's product slate. The cut is made around diesel/gasoil to make sure the refinery maximises margin.
2. If gasoline is oversupplied, part of cut moves to kerosene pool and part of kerosene moves to diesel pool. Overall diesel pool grows. And vice versa. If Gasoline strong demand part of kerosene moves to gasoline and part of diesel moves to kerosene. diesel pool gets smaller
3. Products have strict specifications but movement of the cut point is entirley possible for balancing purposes.
Diesel became even more important with the IMO shipping reductions in sulphur levels in fuel. Diesel bottm cut was able to be added into the ULSFO and VLSFO pools
2. Those three things are what they typically haggle over
Differnetials are small a few dollars but they tell you supply/demand situation because you can look at them over a long period. Physical traders talk to each other an share information. Includes Platts, Argus, etc
3. The benchmark negotiated usually is determined by what benchmark the refinery sells their products. Refineries have a natural hedge and try to buy the same amount of crude a day as products they sell.