1/ Let's talk about this morning's news that "Saudi Arabia ready to abandon $100 crude target to take back market share"

What it likely means: 2025 production hike more likely despite -ve $ impact

And what it doesn't: no full blown "market share war"

Let's review what we know. 2/ First, is this entirely BS?

Seems unlikely.

We've done this dance before many times, and the Saudis are typically pretty quick to issue firm official denials.

Still might come, but they've had >8 hours so they're clearly letting this sit and linger.

https://x.com/Rory_Johnston/status/1839288430586364244

👀👀 "Intelligence Suggests Pro-Ukrainian Group Sabotaged Pipelines, U.S. Officials Say

New intelligence reporting amounts to the first significant known lead about who was responsible for the attack on the Nord Stream pipelines".
nytimes.com/2023/03/07/us/… Assumption had been it needed to be a state actor:

"US officials said that they had no evidence President Volodymyr Zelensky of Ukraine or his top lieutenants were involved in the operation, or that the perpetrators were acting at the direction of any Ukrainian gov't officials."

1. 🇺🇸🛢️🏦 DALLAS FED ENERGY SURVEY

It's that time again, folks!

Every quarter, the Dallas Federal Reserve asks US energy companies a bunch of questions related to their operations and outlook.

🧵Here are some of the the key takeaways from their responses. 2. Majority of US oil and gas companies are expecting to increase capital spending in 2023.

Bulk of that (~40%) is only minor/slight increase (and likely eroded by cost inflation), but ~1/4 of respondents expect to increase capex significantly.

💨🐓 smokin’ the birds

🔥🐄 and now some ribeyes getting some flavour while they wait for their sear 🐓🔥👌🏻

🇲🇽🛢️ Evergreen oil industry basket case:

“Billions in Oil Riches Vanish in Latin America as Pemex Stumbles

Pemex has seen its crude output decline almost every year since 2004 as mismanagement, debt and failing projects drag down Mexico’s oil giant.”
bloomberg.com/news/articles/… Wrote about and charted Mexico and Pemex’s historic fall from grace here:
commoditycontext.com/p/the-ruins-of…

This NYT long read on Putin’s war against Ukraine is truly flabbergasting.

Some of the more mind-blowing snippets to follow below.
nytimes.com/interactive/20… “In interviews, members of the brigade said some of them had barely fired a gun before and described having almost no bullets anyway, let alone air cover or artillery.

But it didn’t frighten them too much, they said. They would never see combat, their commanders had promised.”

🛢️ Re: SPR refill announcement

Yes, 3 MMbbl is smaller than the >200 MMbbl they've sold this emergency release cycle (nailed it).

But this is new territory, was always going to be cautiously implemented, & is undeniable progress—signal to market they'll actually follow through. They'll learn a lot through this purchase, tune and adjust the process, and then purchase a larger amount the next time.

The SPR hasn't needed to be nimble or all that market-aware for the vast majority of its existence, and these muscles will take time to train.

🇨🇳🛢️ BIG CHINA CRUDE DEMAND DATA PRINT:

Latest [delayed] Chinese data shows refinery runs hit their highest level in September (~13.9 MMbpd) since February—BEFORE the ramp-up of China's COVID-zero lockdowns.

That's up 1.2 MMbpd m/m! (up ~180 kbpd y/y) Unfortunately we still don't have the more granular refined product output data yet so can't land on a final apparent demand number, but this'll obviously help!

That said, we know that *some* of that will get eaten up by the continued ramp in refined product exports:

1/🚨 Some context on the WCS blowout from an anon follower in the know (thanks, Sam!).

Summary:
- heavy planned/unplanned refinery maintenance
- Mississippi river running dry, PADD2 refs cutting runs bc can't barge out products
- no bid at USGC bc of oversupplied sours via SPR 2/ Refinery maintenance:

Series of mounting issues have caused refineries into heavier than expected maintenance:

- BP Toledo exploded tragically
- Marathon Garyville fire
- P66 Sweeny had to pull forward maintenance from early 2023

Tighter and tighter over past few weeks.

😱 At $15/bbl under WTI, a barrel of Western Canadian Select (WCS) crude **in Houston**—i.e., no egress issues, just quality—is now sitting at a fresh all-time wide differential.

WCS is 🇨🇦's main export grade—normally wide diffs are caused by pipeline bottlenecks, but not today. Admittedly this series only goes back to 2018 but I used to infer a similar series for the "quality-proxy" component of the WCS differential from Mexican Maya crude and I don't recall it ever getting this bad.

🛢️ Barrel counting question:

Canadian data includes pentanes plus (C5+) with lease condensate as "crude equivalent" whereas most other national sources group C5+ with other natural gas liquids (ethane, butane, etc.)

I *presume* Canada is weird/wrong here, but any other views? What this question really comes down to is whether we're talking *production* (how the liquid was initially derived) or *supply* (what hits the market).

Especially large gaps between the two measures for oil sands given diluent.

Both measures are important in their own way.

🚨 New FREE Post 🚨

⛽️ Everyone is talking about WEIRD US gasoline demand but we know two data issues are muddying the water:

1. a statistical mirage (weekly vs monthly estimates)
2. wholesale product supplied vs retail demand

1/🧵 below

Full post here
commoditycontext.com/p/qc-us-gasoli… 2/ First, the setup for those who haven't been following:

The last few weekly EIA "product supplied" releases (proxy for demand) have implied starkly/counter-seasonally weakening gasoline demand

So weak, in fact, that is *appears* to show demand falling below summer 2020 levels

🧵🛢️📅 Short thread on how I understand and interpret the critically important but chronically—**tragically**—misunderstood crude oil futures curve.

To start, I find it helpful to actually *see* how the curve evolves alongside prompt prices over time, as per the gif below.

/1 I wrote about this last week for Commodity Context subscribers here, which I encourage you to check out in full: commoditycontext.com/p/arc-of-crude…

Summary bullets below.

Let's continue.

/2

The shape of the [front of the?] crude futures curve *mostly* tells you the spot market SD position/inventory reqs.

But the back of the curve?

I'm a big no on the "curve as forecast" view, but what is the *back* of the curve if not some kind of marginal barrel breakeven $ view? I recently noted my obsession with the chart of CO60 (the generic 60th-month forward Brent crude contract), and the reason for my obsession is that it certainly fits with a view that this represents some kind of market marginal barrel view.

📅🛢️ CALENDAR SPREAD CONTEXT

Here's the 12-month Brent spread (white) vs the flat Brent price (blue).

In each of past 3 BIG structural oil price collapses (2008, 2014, 2020) the rout was preceded by this 12-month spread turning negative.

Screaming the other direction today. The 12-month signal had some false alarms (summer 2012, Christmas 2018), so it's not perfect and why I didn't say it *caused* the routs.

But history says it's a good defensive gut-check.

That's why the recent weakening in the spread is important, but we're still WELL positive.

🚨 NEW DALLAS FED ENERGY SURVEY 🚨

🧵 Let's dive into the results.

Biggest question this round:

"Which of the following is the primary reason driving uncertainty regarding your firm's outlook?"

Top answer (46%): supply-chain bottlenecks
Second (27%): gov't reg uncertainty This is a v different story than we got from the last survey, which asked a different question.

March Q: "Which of the following is the primary reason that publicly traded oil producers are restraining growth despite high oil prices?"

Answer & March 🧵

https://twitter.com/Rory_Johnston/status/1506644598743044107

KNEW this headline was coming.

But we also NEED to differentiate between a pipeline being profitable at the project level (concern for a private company) and whether said project is worthwhile at an industry level (gov’t concern)

TMEP still essential on the latter vector.

https://twitter.com/natnewswatch/status/1539622483833266176

I've long believed that the pipeline would likely not break even at a project level: costs kept rising and can't pass all those costs onto shippers without industry-wide repercussions (more in next tweet).

Gov't gotta take a haircut, both for industry and its own macro benefit.

🚨 INAUGURAL DATA DECK 🚨

📊🛢️🔢 My 1st Global Oil Data Deck is a 38-page visualization-heavy report covering major oil market drivers

[🔒 exclusive to paid Commodity Context subscribers]

Let me tell about how the Data Decks will fit into my research 🧵
commoditycontext.com/p/global-oil-d… What what are the Data Decks, exactly?

I've spent more than a decade digging through text-heavy monthly reports to find the key charts or immediately flipping to the appendix to get the raw numbers.

My Data Decks focus on JUST those visual dashboards/back-end data tables.

I don't know nearly enough about the ongoing economic crisis in Sri Lanka, but it's coming up in the oil conversation bc the country is almost entirely out of fuel

Thread from the PM notes that there's only petrol stocks for a single day remaining

Demand destruction thoughts 🧵

https://twitter.com/RW_UNP/status/1526206621755805698

I've mentioned before how it's important to differentiate between demand losses stemming from income/price effects (is demand falling bc of substitution or loss of spending capacity?)

Sri Lankan example might be a 3rd type: macro/external balances stress

https://twitter.com/Rory_Johnston/status/1501217810307072006?s=20&t=CDlmwkHMoXph-mTCzJ52yg

🚨 NEW POST 🚨

🇺🇸🛢️ US oil producers have struggled to grow in the COVID era, with gains more or less stagnant over the past year despite a promising run-up in late-2021.

But the world remains hooked on US shale supply—so can the shale patch turn up?
commoditycontext.com/p/shale-strugg… Now for some 🧵'd charts and takeaways:

When I say the world remains "hooked on US shale supply", that's because more than 2/3 incremental barrels produced between 2010-19 came from US wells as well as more than 3/4 of expected 2023 supply growth according to the latest STEO.

Mother’s Day rib smokin’

Hour 2 of 6 Wrap that shit.