Global Supply Chains Will Never Be “Normal” Again | OilPrice.com
The world has permanently changed due to the fallout of the COVID-19 pandemic, and supply chains are among the most impacted
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TheTalkingMule
Distributed Energy Enthusiast
Oil edged up this morning as the API report from last night showed gasoline inventories fell quite a bit, 4.2Mb! Alas when the real EIA report came out this morning......no such dwindling of gasoline supplies. Perhaps they simply miscounted the 4 million barrel discrepancy? Anybody could do that.
Gasoline supplies down a hair.
Commercial crude supplies down 1Mb.
Overall supplies are actually up 500kb, due to the release of 6Mb from the SPR.
So overall, there's more petroleum based stuff sitting around today in the US than in the first week of March.
And there's also more excess US supply than on any day in history prior to March of 2015. All without really any imports from Russia or Saudi Arabia.
This past week imports came in at -2Mb/d. That's about the highest rate of overall export we see in any week, and double last week's average of -1Mb/d.
So here we sit, at a very tenuous balance, for what to me seems like a suspiciously long period of time. You'd think insanely elevated market prices would show a market desperate to bring more supply online, no? But US production sits right at 11.9Mb/d week after week with no real dips or spikes.
Import/export balance in the meantime is all over the place. One week it's +2Mb/d, then a few weeks later it's -2Mb/d. More recently it mysteriously coincides with the ebbs and flows of strategic reserve releases.
Hmmmmm.....it's almost like there's plenty of crude oil supply and the industry is just trying to keep the minimal appearance of scarcity to match the narrative fed tot he press by hedge funds and oil traders.
Gasoline supplies down a hair.
Commercial crude supplies down 1Mb.
Overall supplies are actually up 500kb, due to the release of 6Mb from the SPR.
So overall, there's more petroleum based stuff sitting around today in the US than in the first week of March.
And there's also more excess US supply than on any day in history prior to March of 2015. All without really any imports from Russia or Saudi Arabia.
This past week imports came in at -2Mb/d. That's about the highest rate of overall export we see in any week, and double last week's average of -1Mb/d.
So here we sit, at a very tenuous balance, for what to me seems like a suspiciously long period of time. You'd think insanely elevated market prices would show a market desperate to bring more supply online, no? But US production sits right at 11.9Mb/d week after week with no real dips or spikes.
Import/export balance in the meantime is all over the place. One week it's +2Mb/d, then a few weeks later it's -2Mb/d. More recently it mysteriously coincides with the ebbs and flows of strategic reserve releases.
Hmmmmm.....it's almost like there's plenty of crude oil supply and the industry is just trying to keep the minimal appearance of scarcity to match the narrative fed tot he press by hedge funds and oil traders.
Thank you for this!
I came to say the following: I don't have any data behind what I'm about to say, but I just don't see how oil holds up above $100 per barrel while the markets roll over. Equities have dropped significantly, Treasury yields are stabilizing / starting to roll over, the fed likely to raise another 0.50% and yet oil is just going to sit here above $100 per barrel with gas prices over $4.00 per gallon?? I just don't see it.
That said, I don't have any oil positions currently. No dry powder for speculative positions anymore...
TheTalkingMule
Distributed Energy Enthusiast
Just got two random price trigger alerts on SCO(ultrashort crude ETF).
Turns out they're doing a reverse split today....but the shares don't split until after hours? Bizarre.
SCO showing up 3xx%?
It would be nice if there were a reliable, easy, and accurate way to short the price of a barrel of oil at certain delivery dates. Can't understand why we don't have simple ETFs for each delivery month for WTI.
Turns out they're doing a reverse split today....but the shares don't split until after hours? Bizarre.
SCO showing up 3xx%?
It would be nice if there were a reliable, easy, and accurate way to short the price of a barrel of oil at certain delivery dates. Can't understand why we don't have simple ETFs for each delivery month for WTI.
Doggydogworld
Active Member
Why would crude move in the same direction as the market? Sure didn't work that way in the '70s.
Russia's exports are not shut off by any means, but they are disrupted enough to keep global supplies tight. 1m bpd can cause real problems if OPEC doesn't offset the shortfall (and why would they?). US shale response is muted as investors still recall the recent carnage. And US supply growth is being absorbed domestically, anyway, as work-from-home fades.
TheTalkingMule
Distributed Energy Enthusiast
That would be true if Russian supply has been disrupted.....but it hasn't. The beginning of the war saw a 1Mb/d dip to exports, but it's since been almost entirely returned to normal. My understanding was it was back to full speed by middle of April. Diverted to various unusual ports, but back to speed.
Meanwhile, global demand is off by what.....3Mb/d on paper? Reality at these prices is that demand might be down something like 5-6Mb/d from the 2019 peak.
Doggydogworld
Active Member
Good data is hard to find. This Freightwaves article says Russian crude+product exports are at 5.95m bpd, down only 250k bpd from February. They refer to Kpler, so I went to Kpler's web site and found this article which puts early March crude+product exports at 7.1m bpd. That's in line with pre-invasion numbers I've seen from IEA/EIA/Platts/etc. So by that measure current exports of 5.95m bpd are a full 1.15m bpd below the time of the invasion..
S&P Global (paywall) says Russian production dropped 1m bpd by April and recovered 200-300k in May. You only cut production when storage fills up, which means exports are down.
Most articles I read are really screwed up. They mix up crude and products, or production and exports, etc. They're just repeating some fragment they heard without any understanding. I ignore them.
The Freightwaves article mentions much longer transit times as Russian oil sails past Europe en route to India and China. The export numbers measure ship loadings. If that ship takes an extra 30 days to reach its new market that has the same effect as a 30 day production halt. That's extremely disruptive.
Where are you getting 3m bpd? Demand is up y/y is almost every country except China. And China is using the opportunity to build reserves instead of cutting imports. Meanwhile reserves are down strongly in Europe and North America. Where is your 3m bpd of excess oil going?
mspohr
Well-Known Member
TheTalkingMule
Distributed Energy Enthusiast
IEA lowered their 2022 avg projection from 99.4 to 98.1Mb/d. Given how they always just lower and lower throughout the year, I assume it'll end up around 96Mb/d.
With prices as high as they are today, we gotta be down 3Mb/d to somewhere around 97Mb/d right now globally. And half of China was/is locked down.
I stick with only very top level basic global numbers, don't follow these markets too much, and pull my conclusions out of my ass. But my as is very logical and usually accurate.
TheTalkingMule
Distributed Energy Enthusiast
Apparently these ultra-shady Greek tanker operators already have plans to deal with an embargo by doing a lot of ship to ship transfers and I guess re-labeling of Russian shipments.
mspohr
Well-Known Member
Still looks like 2019 is peak oil.
Doubt there will be much recovery this year.
Doubt there will be much recovery this year.
Nice chart. It is good to think through how strong a signal US oil production is for global production. Where is oil production growing these days? I think US production was pretty important for the peak in 2019. It'd be good to look back at the OPEC Monthly report. My hunch is that there's just not enough global production this year to support setting a new peak.
Doggydogworld
Active Member
US coal is down >50% from its peak 15 years ago. Europe and other major countries like Japan, South Korea and Australia are also down. Globally? Coal generation just set a new all-time record. Growth in China alone offset all the declines, plus #2 India is still growing along with Indonesia and some others.
Oil is much more valuable than coal. High demand drives people to pay 10x or more for oil BTUs. US oil demand will not drop 50% in a decade, like coal did. The best counter-argument I see is China's oil demand may grow slower than coal. Xi may not care about CO2, but he hates imports with a passion. Even so, I expect oil consumption to climb another 4-5 years. A severe, extended recession and/or perpetual Zero Covid could change that, of course, but I wouldn't bet that way.
Also worth nothing that I recall that at least one of the failed shale companies was purchased by a major. Owning is a pretty good way to ensure there's no rebound.
Hmmmm, interesting that it's a report on electricity generation from coal, not coal consumption. I remembered a report back in 2014 that china was building newer more efficient coal power plants to replace older less efficient ones. So what's the actual consumption change, since there was a period where china's coal consumption looked like it was decreasing?
TheTalkingMule
Distributed Energy Enthusiast
China's looking to double solar installations to 108GW this year, up from 75-85GW projections just a few months ago. At this pace they'll be offsetting a good amount of coal generation before long.
Germany was/is a huge coal user, but they're now dead set on 100% renewables in 13 years. I think they'll get to around 85% far faster than that.
I don't see any angle to coal growth beyond literally right now, maybe India driven perhaps. Oil was looking like maybe a slight peak in 2023, 24 or 25, but that was before Putin went nuts.
Germany was/is a huge coal user, but they're now dead set on 100% renewables in 13 years. I think they'll get to around 85% far faster than that.
I don't see any angle to coal growth beyond literally right now, maybe India driven perhaps. Oil was looking like maybe a slight peak in 2023, 24 or 25, but that was before Putin went nuts.
TheTalkingMule
Distributed Energy Enthusiast
Doggydogworld
Active Member
Empty gesture by politicians pretending to take action. It changes nothing other than adding some frictional costs. The west must either slash consumption via rationing or continue funding Putin. Those are the only two options. Everything else is just noise.
/cloudfront-us-east-2.images.arcpublishing.com/reuters/FY2W2O3TK5NCBNSAIMYMBKCGXI.jpg)
China sees biggest growth in energy and coal use since 2011
China recorded its biggest increase in total energy consumption and coal use in a decade in 2021, as the economy recovered from COVID-19 slowdown a year earlier, data from the country's statistics bureau showed on Monday.
www.reuters.com
It's worth remembering that 2020/2021 winter was very cold (same as Europe), which combined with their ban on imports from Australia led to coal shortages, both for heating and electricity. Some regions had energy rationing.
TheTalkingMule
Distributed Energy Enthusiast
Certainly. And oil pricing will crash real soon. Just posting it.
It'll knock down Russian profits quite a bit in the short term. Friction and limited buyers.
Very excited for this trade to reverse soon.
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