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Crude prices will likely get a fresh boost this week, as stockpiles at the key US storage hub in Cushing, Oklahoma, risk collapsing to the lowest level (aka “tank-bottoms”) in almost a decade.

Such a move would embolden those aiming for a return of $100 oil by year-end.

Cushing matters. Being the delivery point for the WTI futures contract, the rise and fall of the holdings is among the market’s most closely followed trends. So far in 3Q, inventories have slumped by ~47% to 22.9m barrels. That’s the lowest since July 2022 and that’s not far away from the 2014 lows.

If that comes to pass, it’d highlight the scramble for near-term supplies as the global market tightens up.

Estimates come on Tuesday, followed by the official print the next day.

Andurand: Oil Prices Could Exceed $140 If China’s Economy Fully Reopens

January 10, 2023

Andurand: Oil Prices Could Exceed $140 If China’s Economy Fully Reopens

Hedge fund manager Andurand: full reopening of Chinese economy could send oil prices past $140 per barrel.
Andurand: The market is underestimating the scale of the demand boost.
Andurand did say last week that oil demand will be limited somewhat by a growth in the EV sector.

Crude oil prices could exceed $140 per barrel yet this year if China’s economy fully reopens, hedge fund manager Pierre Andurand said on Friday.

Andurand sees the possibility of crude oil demand growing by more than 4 million barrels per day this year—a 4% increase over last year. This far exceeds crude demand growth set out for 2023 by other oil market forecasters.

“I think oil will go upwards of $140 a barrel once Asia fully reopens, assuming there will be no more lockdowns, Andurand said, adding that the “market is underestimating the scale of the demand boost that it will bring.”

Andurand’s forecast goes against the trend that crude oil prices set so far this year. During the first week of the year, crude oil prices tumbled by 9% in the first two trading days in what was the worst start to a year since 1991.

Last week, Andurand said in a tweet that oil demand could increase between 3 and 4 million bpd this year, aided by the switch from oil to gas.

China’s reopening has been on the oil industry’s radar ever since it employed its zero-covid policies and locked down much of its economy. China only recently made significant changes to its covid policies, abandoning its strict measures in favor of relaxed testing requirements and travel restrictions. But China’s reopening has been plagued with a new wave of Covid, spooking many oil bulls off what would be their rejoicing at what should be a significant bump in demand.

Andurand did say last week that oil demand will be limited somewhat by a growth in the EV sector, as EVs have the potential to displace 600,000 bpd of oil demand.

EU’s Oil Price Cap Creates a Price Cap… on Stupidity

December 10, 2022

EU’s Oil Price Cap Creates a Price Cap… on Stupidity

The EU and the US went forward with their long-debated, long-telegraphed move to put a price cap on Russian oil at $60 per barrel.

By believing they can pressure suppliers into not hauling Russian oil lest they run afoul of the sanctions that support the price cap, they believe they can take only Russian oil off the market for the long run.

Because of the way oil is actually traded in the real world, versus the way it trades in Janet Yellen’s head, this policy is actually much harder to implement than it actually looks. You don’t buy oil at the crude oil counter at Target or Wal-Mart.

There isn’t a price tag you can look at and say yes or no too. As Tsvetana Paraskova at Oilprice points out, crude contracts are written based on a discount or premium to a benchmark price at a particular moment in time.

“Physical traders rarely trade on a fixed price,” John Driscoll, chief strategist at JTD Energy Services Pte Ltd, told Bloomberg.

“It’s a much more complex space where they trade on formulas and spot differentials to a benchmark crude for the trading of actual cargoes as well as for hedging that follows,” said Driscoll, who has more than 30 years of trading oil in Singapore.

…click on the above link to read the rest…

What is the Next Thing that Will hit us? Brace for it, Because it may be Huge

December 9, 2022

What is the Next Thing that Will hit us? Brace for it, Because it may be Huge

Despite having ancient seers (the “haruspices”) as ancestors, I don’t claim to be able to predict the future. But I think I can propose scenarios for the future. So, what could be the next big thing that will hit us? I suggest it will be the disruption of the oil market caused by the recent measure of a price cap on Russian oil.

Do you remember how many things changed during the past 2-3 years, and changed so unbelievably fast? There was a pattern in these changes: one element was that we were told they were just temporary, another was that they were done for our sake. We were told that we needed “Two weeks to flatten the curve,” and that “the sanctions will cause the Russian economy to collapse in two weeks,” and many more things. Then, our problems will be solved and the world will return to normal. But that didn’t happen. Instead, the result was a “new normal,” not at all like the old one.

Now, the obvious question is “what next?” More exactly, “what are they going to hit us with, next time?” There is this idea that there may be a new pandemic, a new virus, or the old one returning. But, no. They are smarter than that — so far they have always been one step, maybe two, ahead of us. They are masters of propaganda, they know that propaganda is all based on memes and that memes have a finite lifetime. Old memes are like old newspapers, they are not interesting anymore. A particular bugaboo can’t scare people for too long, and the idea of scaring us with a pandemic virus is past its usefulness stage. They may have probed us with the “monkeypox” pandemic, and they saw that it didn’t work. It was obvious anyway. So, now what?

…click on the above link to read the rest…

G7 Russian Oil Price Cap, Admission of Defeat From Collective West–Part 2

September 4, 2022

G7 Russian Oil Price Cap, Admission of Defeat From Collective West–Part 2

Dodgy Demand Data? The Oil Price Collapse Conspiracy

August 17, 2022

Dodgy Demand Data? The Oil Price Collapse Conspiracy

WTI oil prices have given up nearly all their gains since Russia invaded Ukraine, falling roughly 9.5% over the course of the week amid fears oil demand is collapsing.
Some oil pundits are now claiming that the Biden administration has been fabricating low gasoline demand data in order to drag prices lower.
While Gasbuddy claims there was a 2% rise in gasoline demand last week, the EIA reported a 7.6% drop in demand.

WTI crude oil prices fell to their lowest point since early February on Thursday, giving up virtually all gains since Russia invaded Ukraine. WTI crude for September delivery tumbled -1.5% to close at $89.26/bbl while Brent crude for October delivery fell -2.1% to $94.71/bbl. WTI crude has lost ~9.5% over the course of the week, marking the largest one-week percentage decline since April amid growing fears that oil demand will collapse when western nations descend into a full-blown recession.

While oil producers are certainly beginning to feel the heat, it’s refiners like Valero Energy (NYSE: VLO), Marathon Petroleum Corp.(NYSE: MPC), and Phillips 66 (NYSE: PSX) who have been hardest hit by the pullback thanks to a sharp decline in their refining margins aka crack spreads.

For months, refiners have been enjoying historically high refining margins, with the profit from making a barrel of gasoil, the building block of diesel and jet kerosene, hitting a record $68.69 in June at a typical Singapore refinery. The margin later settled in the high 30s a few weeks later, a level still nearly four times higher than the $11.83 at the end of last year, and some 550% above the profit margin at the same time in 2021.

…click on the above link to read the rest of the article…

A potential ‘black swan’ for US oil prices is being overlooked: unreliable electricity grids

July 13, 2022

A potential ‘black swan’ for US oil prices is being overlooked: unreliable electricity grids

Electricity grid problems in the US are a potential “black swan” that could wreak havoc in energy markets, according to Cornerstone Futures research director Brynne Kelly.

In an analyst note, the energy trader argues that failing power grids and electricity shortages could be the next vulnerability in the supply chain for oil and its products, such as gasoline.

Those under-the-surface risks are being overlooked, and that makes them a possible “black swan” — an unpredicted event with a severe impact. While crude oil isn’t much used to generate electricity, power itself is needed to make oil, Kelly noted.

“Said another way, a failing power grid COULD BE the next oil chain supply problem,” she said.

“Problems with power grids across the US and other countries are a potential catalyst for chaos in energy markets that are underappreciated.”

The reliability of the US electricity grid is being taken for granted, Kelly said. But it’s under pressure as the industry goes through a mandated shift from fossil fuels to clean energy sources, and with the peak summer demand ahead.

…click on the above link to read the rest of the article…

JPMorgan Sees ‘Stratospheric’ $380 Oil on Worst-Case Russian Cut

July 4, 2022

JPMorgan Sees ‘Stratospheric’ $380 Oil on Worst-Case Russian Cut

An employee walks across the top of an oil storage tank at an oil field near Salym, Russia. — An employee walks across the top of an oil storage tank at an oil field near Salym, Russia.

Source: Bloomberg

Global oil prices could reach a “stratospheric” $380 a barrel if US and European penalties prompt Russia to inflict retaliatory crude-output cuts, JPMorgan Chase & Co. analysts warned.

The Group of Seven nations are hammering out a complicated mechanism to cap the price fetched by Russian oil in a bid to tighten the screws on Vladimir Putin’s war machine in Ukraine. But given Moscow’s robust fiscal position, the nation can afford to slash daily crude production by 5 million barrels without excessively damaging the economy, JPMorgan analysts including Natasha Kaneva wrote in a note to clients.

For much of the rest of the world, however, the results could be disastrous. A 3 million-barrel cut to daily supplies would push benchmark London crude prices to $190, while the worst-case scenario of 5 million could mean “stratospheric” $380 crude, the analysts wrote.

“The most obvious and likely risk with a price cap is that Russia might choose not to participate and instead retaliate by reducing exports,” the analysts wrote. “It is likely that the government could retaliate by cutting output as a way to inflict pain on the West. The tightness of the global oil market is on Russia’s side.”

Oops! U.S. oil and gas exports fuel domestic price rise

June 30, 2022

Oops! U.S. oil and gas exports fuel domestic price rise

The U.S. oil and natural gas industry long fought for and in the last decade finally won release from federal restrictions that limited exports. The ostensible reason was that because of the so-called “shale revolution” in the country’s oil and gas fields, the United States would have plenty of oil and gas to spare for export.

The real reason behind the push was that the oil and gas industry wanted what almost every other industry in American already had: The right to sell their products to the highest bidders no matter where they lived on the globe.

This made it almost certain that as U.S. prices rose to match world prices, U.S. consumers would feel the pain. And, since energy prices affect everyone who votes, they are always politically consequential.

So, it is unsurprising that with U.S. regular gasoline prices over $5 per gallon President Joe Biden lashed out at U.S. oil companies—which are having one of their best years ever—saying they need to increase production of refined oil products. The companies have responded that their refineries are running at close to maximum capacity and so there is not much they can do in the short run.

What is left unsaid is that it has long been the policy of the United States to allow the export of refined (as opposed to crude) petroleum products such as gasoline, diesel and heating oil. The country has refinery capacity significantly in excess of domestic needs and so exports a considerable volume of refined products including about 1 million barrels per day (mbpd) of gasoline and 1.4 mbpd of diesel and heating oil (for the week ending June 10)…

…click on the above link to read the rest of the article…

Oil Likely To Hit $200: SEB Group

June 30, 2022

Oil Likely To Hit $200: SEB Group

Oil prices are likely to soar past $200 per barrel if G7 manages to cap the price of Russian crude oil, according to chief commodities analyst at Swedish bank SEB Group.

Bjarne Schieldrop, SEB analyst, said on Wednesday in no uncertain terms that the G7’s price capping proposal was a “recipe for disaster” given the current stress that the oil market is under.

The G7 leaders agreed on Tuesday to study ways to cap the price of Russian oil sold internationally and are seeking support among “like-minded” nations. It was one of the critical items to be discussed at this week’s G7 meeting as the group tries to find creative ways to lower energy prices for themselves and maintain adequate crude supplies from Russia—while simultaneously punishing Russia in what many see as an impossible task.

U.S. Treasury Secretary Janet Yellen continued to put pressure on European countries to support a price cap.

According to Schieldrop, the plan seems “neat on paper, but it sounds like a recipe for disaster right now,” given the strong demand for crude oil and low supplies that so far given Russia the upper hand in the market. Russia could, the analyst argued, choose not to sell the oil at a capped price—a decision that could lead to Russia’s production falling by as much as 2 million barrels per day.

Russia’s crude and condensate production rose in June by 5% to 10.7 million bpd, according to Kommersant sources—a figure that includes between 800,000 and 900,000 bpd of condensate, which is not included in the OPEC+ agreement. But Russia’s oil exports have slipped 3.3% in June with the rise of domestic refining demand.

Russian Deputy Prime Minister Alexander Novak said that Russia would raise its production again in July.

The world must brace itself for a further surge in oil prices

June 11, 2022

The world must brace itself for a further surge in oil prices

Outlook for production is bleak with Russian shortfalls hard to replace

With Russia’s sanctions-hit oil output facing an increasingly difficult route to market, there are legitimate fears that supply could fall much further © Andrey Rudakov/Bloomberg Share on twitter (opens new window) Share on facebook (opens new window) Share on linkedin (opens new window) Save David Sheppard, Energy Editor YESTERDAY 130 Print this page Receive free Oil updates We’ll send you a myFT Daily Digest email rounding up the latest Oil news every morning.

JPMorgan’s chief executive Jamie Dimon thinks oil prices could surge to $175 a barrel later this year. Jeremy Weir, the head of commodity trader Trafigura, says oil could go “parabolic”.

Energy Aspects, a consultancy with clients stretching from hedge funds to state energy companies, says we are facing “perhaps the most bullish oil market there ever has been”. Goldman Sachs thinks oil prices will “average” $140 a barrel in the third quarter of this year.

It is tempting to dismiss this mass outbreak of bullishness as book-talking by banks and traders positioned for a short-term rise in crude, which has already reached $120 a barrel.

Those with long memories recall the surge in oil to $147 a barrel on the eve of the financial crisis, when Goldman was among the chief cheerleaders for a rally that quickly reversed as the economy went south. Oil was at $40 a barrel by Christmas 2008, yet some of the bonuses earned by Wall Street energy traders that year went down in market lore.

But while a healthy dash of scepticism is usually warranted with price forecasts, you only need to scratch the surface of the oil market to see that these bullish calls are, this time, well-founded.

…click on the above link to read the rest of the article…

BofA: Sharp Decline In Russian Exports Could Send Oil Above $150

May 31, 2022

BofA: Sharp Decline In Russian Exports Could Send Oil Above $150

Analysts: Asian buyers are unlikely to be able to absorb all the Russian oil unwanted in the West.
There is a distinct possibility of a sharp drop in Russian oil exports.
BofA: A sharp contraction in Russian oil exports could push Brent well past $150/bbl.

Brent Crude prices could jump to well above $150 per barrel if Russia’s oil exports fall off a cliff in the coming months, according to Bank of America.

“With our $120/bbl Brent target now in sight, we believe that a sharp contraction in Russian oil exports could …. push Brent well past $150/bbl,” analysts at Bank of America (BofA) Global Research wrote in a research note on Friday carried by Reuters.

In a base-case scenario, Bank of America expects Brent Crude prices to average $104.48 a barrel this year and $100 a barrel in 2023.

Early on Friday, Brent Crude was trading at over $117 per barrel, the highest in two months, amid tight fuel supplies globally and bullish prospects of demand with the U.S. driving season beginning with the Memorial Day holiday weekend and Shanghai in China set for gradual reopening from June 1st.

There is a distinct possibility of a sharp drop in Russian oil exports as the EU continues to seek consensus and persuade Hungary to drop its opposition to a Russian oil embargo. Reports have it that some EU member states are inclined to accept a temporary exemption of Russian pipeline supply to central Europe via the Druzhba pipeline from the embargo as a bargaining chip to convince Hungary to agree to a ban on imports of Russian seaborne oil.

…click on the above link to read the rest of the article…

Australian fuel import bill going sky-high

May 26, 2022

Australian fuel import bill going sky-high

In March 2022 Australia’s petroleum product imports have reached almost AU$ 4 bn per month, an increase of 70% compared to December 2019.

Fig 1: Petroleum product imports by volume (black lines) and value (brown line)

Fig 2: Australian dollar to US$ exchange rate

The Australian Dollar was also around 0.7 US$ in December 2019, just like in May 2022 so it was not the exchange rate which drove up the bill in that period. It is the closure of Australian refineries (caused by peak oil of international oil companies), the oil price and the competition for fuels on the Asian market.

The Morrison government’s election-opportunistic cut of fuel excise duty by 50% until Sep 2022 will of course not reduce this import burden on the balance of payments. Fuel imports are now 12% of goods and services imports:

Fig 3: Goods and services debits (imports)
https://www.abs.gov.au/statistics/economy/international-trade/international-trade-goods-and-services-australia/latest-release#goods-and-services-debits-imports-seasonally-adjusted

Fig 4: Diesel imports by volume and value

Fig 5: Diesel imports by country

Australia’s dependency on China and a brand-new Chinese refinery in Brunei in the last years is clearly visible.

Fig 6: Monthly diesel imports

Imports change from month to month depending on the arrival of tankers. Diesel from China has been replaced by Diesel from India.

Fig 7: Petrol imports by value and volume

Fig 8: Petrol imports by country. Singapore now dominates

Fig 9: Jet fuel imports by value and volume

If jet fuel imports go back to their pre-Covid levels of, say, 600 ML/month the jet fuel import bill will double to A$ 700/month.

Conclusion: Australia must reduce its thirst for transport fuels. No new projects should be started which increase fuel consumption.

Australian Oil Stocks Consumption Cover
22 Mar 2022
https://crudeoilpeak.info/australian-oil-stocks-consumption-cover

9/12/2021
Australia crude oil import vulnerabilities Sep 2021 data
http://crudeoilpeak.info/australia-crude-oil-import-vulnerabilities-sep-2021-data

15/2/2021
Exxon-Mobil’s refinery closure in Australia: peak oil context
https://crudeoilpeak.info/exxon-mobils-refinery-closure-in-australia-peak-oil-context

14/11/2020
Australia’s BP Kwinana refinery closure: peak oil context
https://crudeoilpeak.info/australias-bp-kwinana-refinery-closure-peak-oil-context

Running On Empty

May 20, 2022

Running On Empty

Well, we definitely seem to have passed a threshold of sorts. For most of the sixteen years since I started blogging, one of the things I had to point out constantly to my readers was the slow pace of historical change. Whenever I posted an essay on the twilight of industrial society, I could count on fielding at least one comment from a reader who expected the entire modern world to crash and burn in the next few months. I’d have to patiently remind them that Rome wasn’t sacked in a day—that it takes years of breathtakingly moronic decisions motivated by mindless greed, vicious partisan hatred, blind ideological dogmatism, and a total unwillingness to think about the long-term consequences of short-term decisions, to bring a civilization down.

Now of course all through the years while I was telling people this, decisions of the kind I’ve just described, guided by motives of the sort I’ve just characterized, were standard operating procedure throughout the industrial world. Those proceeded to have their usual effect. I still don’t expect modern civilization to crash to ruin in the next few months, but it’s reached the point that I no longer have to tell people that the Long Descent won’t show up as soon as they think. No, at this point it’s my ironic duty to suggest that they make whatever preparations they have in mind sooner rather than later, because the world shows no signs of waiting for them.

As I write this, the most obvious set of problems has to do with the economies of the United States and its client states. Those of my readers who follow financial media already know that signs of economic trouble are elbowing one another out of the way to get to the front pages…

…click on the above link to read the rest of the article…

Just a hint from the mainstream that limits precipitate rising oil prices

May 16, 2022

Just a hint from the mainstream that limits precipitate rising oil prices

Last week a Bloomberg writer at the very end of an article explained that the “only solution” to high gasoline and diesel prices is recession. While I would not accuse the writer of advocating degrowth—this would be too radical for a mainstream business publication—his analysis points to a key and obvious cause of today’s high prices for oil and other commodities: There isn’t enough of them to go around.

There’s an old saying in the oil industry that the solution to high prices is high prices. The logic is that high prices will do two things: 1) Reduce demand as those who cannot afford oil products at high prices will cut back and 2) incentivize more exploration and production as companies seek to increase production to take advantage of high prices.

The big question today is whether the second mechanism can actually ramp up oil production enough to bring down prices. In a recent survey a large number of oil executives said their production plans do not depend on current prices. Many cited the desire of investors in publicly traded companies to receive larger dividends and benefit from the corporate buyback of shares (which tends to increase the stock prices as fewer shares are available for trading).

It’s instructive that 9 percent of those responding to the survey cited an oil price of $120 per barrel as the level at which they would consider raising production. And keep in mind that they are NOT talking about $120 per barrel for a few months, but as an average price over many years—since it can take many years to bring large projects into production and those projects can produce for many years after production begins…

…click on the above link to read the rest of the article…

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