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
Mar 16 • 11 tweets • 2 min read
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
Mar 12 • 12 tweets • 2 min read
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.
Feb 25 • 25 tweets • 5 min read
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.
Feb 7 • 4 tweets • 1 min read
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.
Jan 4 • 10 tweets • 2 min read
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.
Jan 4 • 4 tweets • 1 min read
Updated as Error in last set of tweets.
These are things to consider 1. When buying Dec cargoes market was in Backwardation so Atlantic Basin buyers wanted beginning Dec ME cargoes as cheapest with ave. month pricing. Therefore most of cargoes would already passed Suez (1/4)
Jan cargoes were bought under contango so AB customers would buy end of Jan cargoes as they are the cheapest. ME grades are very expensive compared to other cargoes
2. Flow of oil has changed. More flows North to South than South to North. effect of Russian war and Shale. (2/4)
Dec 4, 2023 • 7 tweets • 2 min read
1. short 🧵
One of the biggest changes to Physical oil market that is always forgotten and significantly affects inventories compared to the past is the massive increase in spot crude oil availability. This has significantly altered the need to hold as much inventory.
2. For much of the oil market history cargoes of crude oil were either bought on destination or owner restricted contracts or exports was prohibited.
What do I mean?
Nov 26, 2023 • 12 tweets • 2 min read
1. 🧵 on the price cap
Let’s start. The physical oil market has always been a home for many that do not have a moral compass. Where money is to be made, they don’t bend the rules they beak them completely. Think Rockefeller, Rich, etc.
2. When you put people like this up against theoretical academics and civil servants that have no experience of the physical oil market there will only be one winner.
Nov 21, 2023 • 13 tweets • 3 min read
1. Will Saudi Cut?
Prices rallied late on Friday and through Monday with the increased expectation of either OPEC+ or just Saudi cutting.
If cutting is about creating strong backwardation to stabilise prices, then I think they are flawed in their thinking.
2. It May drive out short speculators short term but oil price cannot just go up continually. Oil price movements are about momentum. At some point there will become a dearth of buyers. Longs will then take profit and short sellers will rejoin the fray pushing prices down again.
Nov 10, 2023 • 4 tweets • 1 min read
1. One of the most tedious jobs as a physical trader is tracking who has purchased every cargo. Multiple trading teams trading multiple regions know who has bought what and where it is going. They know load dates, arrival dates, volume, who is going to ship it. Diligence is key.
2. They know this information on supply/demand months before many that paper trading see their ship tracking /import data.
Physical trading is all about personal relationships. It is old school phone calls etc No algos in sight
Nov 10, 2023 • 11 tweets • 2 min read
1. 🧵
Let's have a look at how China buys it's crude oil.
First is on Long term contracts. These usually run for one year and start on the 1st of January. Decision to buy these cargoes are made more than 1 year before loading for some.
2. China has the ability to minimise the amount of volume they take but that typically means they have around +/-10% on the amount they load on the ship. The contract also allows them the possibility of asking for more if they so wish
Nov 9, 2023 • 9 tweets • 2 min read
1. This is wrong. Futures price has nothing to do with how physical buyers buy their crude oil. Physical buyers are buying much further ahead than the front month and are less affected by big movements. Refiners also have natural hedges against flat price movements.
2. Example WAF crude will begin trading next week. It will be for the January programs. So will be priced against March Brent contract not the current January front month contract. Also because pricing period is based on loading period not when you buy.
Nov 6, 2023 • 8 tweets • 2 min read
1. One scenario I can see.
Without the 1mbpd cut by Saudi Arabia could prices have reached $80-90 anyway? May have taken a bit longer but may have prevented an overshoot to nearly $100. That overshoot may have caused the current reduce in demand for crude oil
2. How do we know there is reduced demand? Differentials of crude are falling fast and so are product cracks
They tightened market too quick and by too much. The diffs and prices got too high it first reduced demand for products, so when product cracks fell refinery margins fell
Sep 26, 2023 • 4 tweets • 1 min read
1. Important
Russian gasoil/gasoline stocks same as Sep22. Fast build due to EU sanctions + running refineries hard. Drop is just removing excess barrels (4mb)
Gasoil production 1.7mbpd, consuming 0.7mbpd. Therefore build is 1mbpd so will take 4 days to refill to January levels
2. It is believed refinery maintenance is 44% of capacity currently. That means gasoil production is 1mbpd (down from 1.7mbpd). With consumption at 0.7mbpd, that means builds of 300kbpd. That means back to January levels in 14 days.
Sep 19, 2023 • 12 tweets • 2 min read
1. 🧵 about potential diesel problems.
Energy Minister Abdulaziz Bin Salman (ABS) is completely missing the damage he is creating in this market. His focus on Chinese inventories means he is going to create havoc if this is a cold Winter particularly West of Suez.
2. If you consider that OPEC currently have well over 5mbpd of medium/heavy sour barrels with their quota and voluntary cuts. The 1.5mbpd voluntary saudí and Russia made this summer have been particular damaging.
Sep 5, 2023 • 4 tweets • 1 min read
1. Most interesting fact about refineries is most of new capacity since 2013 is located in oil producing countries such as KSA, Russia, Malaysia, Brazil, Colombia, USA, Kuwait, UAE, Iran, etc and not in consuming countries
2. Only China and South Korea from consuming nations saw their capacity increase markedly. Big drops were seen in consuming countries like Japan.
Jul 28, 2023 • 12 tweets • 2 min read
Here is worst case scenario with the Saudi cut continuing.
1. Saudi continue to cut Arab light, medium and heavy for September
These cargoes would arrive in China in October or November and in North West Europe in October.
China they will be processed Nov/Dec /Jan
2. in Europe in October and November.
Why is the Saudi cut so important? It will reduce the amount of both diesel and HSFO in the market forcing their cracks up
Jul 18, 2023 • 8 tweets • 2 min read
1. North Sea CFDs have moved back into contango.
Forties differential at -$0.20. In a tight market I would expect Forties to be over $1.00, closer to $2.00 in a market short 2mbpd. Rest of BFOET crudes also much lower than normal, should be at least $2.00 more in a tight market
2. Med crude differentials such as Saharan Blend much lower than a tight market at least $2.00 lower than a tight market
WAF crude is stronger but still at least $2 lower than a tight market.
Jun 10, 2023 • 13 tweets • 3 min read
1. Timeline of the Saudi cuts
22nd May: Day before ABS comments. Brent closed at $75.99. Had been rising steadily since low on the 4th May. At this point Market did not expect cuts
23rd May: ABS makes comments at Short sellers and the price closed at $76.84 up $0.85
2.
24th May : Market continues to look positive about the ABS comments. Closes at $78.36 up $1.52. So a total of $2.37 for the ABS comments.
25th May: Novak says no cuts are likely. Oil market falls to $76.26 down $2.10. This left the market up $0.27 since the comments.
Jun 6, 2023 • 15 tweets • 3 min read
1. Saudi OSPs, I think are following the @anasalhajji law for OSPs. This is the explanation that Sir Anas of Texas once gave and it is an extremely plausible explanation.
They increased them to try and reduce demand for their crude, because they cannot fulfill demand otherwise
2. I have said for a while saudi crude oil is expensive. When i say it is expensive it is because it gives much poorer refinery margins than does other crude oil.
Refiners have basically a natural hedge. They buy crude against a benchmark and sell products vs the benchmark.
