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.
Nov 4 • 7 tweets • 1 min read
1. Some thoughts on oil after Election
- 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.
Oct 16 • 14 tweets • 3 min read
1. Simple How the North Sea Brent Complex works.
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.
Oct 4 • 11 tweets • 2 min read
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
Oct 2 • 17 tweets • 3 min read
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
Sep 18 • 15 tweets • 3 min read
1. Physical traders rarely negotiate fixed price for their oil.
What they do negotiate is
- The differential
- The benchmark off pricing
- The pricing period
- plus a few other non-price related factors.
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
Sep 12 • 6 tweets • 2 min read
1. Oil markets fall under the McNamara Fallacy
It was named after Robert McNamara, the US Secretary of Defense during the Vietnam War. And involves making a decision based solely on simple and easy quantitative metrics and ignoring anything difficult to interpret
2. New car sales in EU
2019: 13028948
2020: 9939418
2021: 9700089
2022: 9255926
2023: 10500000
Despite growing from 242k to 1.5m in that period BEV got a huge boost in their market share through 2020-23 because total car sales fell by nearly 30%.
Mar 18 • 11 tweets • 2 min read
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
