Shorting Oil, Hedging Tesla

[TheTalkingMule]

Weird day in the oil world. 9x% Russian oil ban by the EU drove WTI/Brent even higher. All oil stocks opened higher too as you'd expect, then tailed off throughout the day ending up about -2% across the board.

I guess this UK windfall tax might be spooking investors.

Maybe it's OPEC announcing they may carve off Russia from the next production deal, allowing other players more increase. I'd LOVE to see another OPEC+ spat, where SA and Russia take turns dumping crude onto the market to take share. We shall see.

 

[jhm]

Boy howdy.

 

[Skryll]

Weird day in the oil world. 9x% Russian oil ban by the EU drove WTI/Brent even higher. All oil stocks opened higher too as you'd expect, then tailed off throughout the day ending up about -2% across the board.

I guess this UK windfall tax might be spooking investors.

Maybe it's OPEC announcing they may carve off Russia from the next production deal, allowing other players more increase. I'd LOVE to see another OPEC+ spat, where SA and Russia take turns dumping crude onto the market to take share. We shall see.

What do you make of China reducing sales tax on gas cars now, China halves purchase tax on mainstream ICE vehicles for rest of the year

Related to cheaper Russian oil access ?

 

[TheTalkingMule]

What do you make of China reducing sales tax on gas cars now, China halves purchase tax on mainstream ICE vehicles for rest of the year

Related to cheaper Russian oil access ?

Looks like standard stimulus to me. The party wants Chinese consumers to buy small Chinese cars as the lockdown unwinds.

 

[TheTalkingMule]

The tide is slowly turning on oil. Russia and the Saudis have renewed their open feuding to some degree, with sources claiming Aramco is ready to fill some of the gap in Russian exports. These two having a spat is massive for futures pricing, but only once there's clarity on Russian exports moving forward.

Oil dropped overnight on the news and then traders confidently snapped it right back at 8 this morning. Doesn't look like anything can reverse this trade until we know how much oil will flow out of Russia in whatever corners of the market. Why people would believe exports will drop appreciably is beyond me.

Weekly EIA report has been delayed from 10:30 to 11:00 as I'm sure some "mistakes" were discovered in the supply numbers.

 

[TheTalkingMule]

US crude report for last week was a mirror image of the previous week. Production sitting precisely unmoved, and excess supplies only shifting with variance in the level of export. The very definition of price gouging.

We are fully reopened and producers seem unwilling to move production back to anywhere near where we left off in 2020. A tiny 600kb/d increase to 12.5Mb/d would crumble this entire market. And so we continue to wait for this oil trade to break.

If I didn't know any better, I'd say the world economy is rigged to print oil & gas profits!

I'd like to see Biden double his strategic reserve release from 1Mb/d(really more like 600kb/d) to an actual 2Mb/d. And why not? The nation would profit something like $100M per day! We certainly don't need a 1992 style strategic reserve anyway. If we want more oil, we can double our fracking output in 30 days if WWIII hits.

 

[iPlug]

The tide is slowly turning on oil. Russia and the Saudis have renewed their open feuding to some degree, with sources claiming Aramco is ready to fill some of the gap in Russian exports. These two having a spat is massive for futures pricing, but only once there's clarity on Russian exports moving forward...

OPEC+ reported at a videoconference a few hours ago that they would raise production to 648k b/d (50% increase compared with the increase planned last year)

US crude report for last week was a mirror image of the previous week. Production sitting precisely unmoved, and excess supplies only shifting with variance in the level of export. The very definition of price gouging.

Gotta hand it to them though, they finally figured out discipline.

 

[TheTalkingMule]

OPEC+ reported at a videoconference a few hours ago that they would raise production to 648k b/d (50% increase compared with the increase planned last year)

Saw that. Did you interpret the "July and August" raises as two 648k raises? I'd love to know why we have to sit back and take this nonsense from OPEC. We absolutely do not need them anymore and only import drips from SA, so why not threaten an export ban?

We need a real plan, not Band-Aids.

Gotta hand it to them though, they finally figured out discipline.

It's amazing. There's dozens of big players, yet they all move in sync. Either that or production is simply being dumped into and then pulled from private storage.

 

[iPlug]

Did you interpret the "July and August" raises as two 648k raises?...

That is how I take it, but not 100% sure. NY Times is saying:

...the group said it would raise production by 648,000 barrels a day in July and then again in August, an increase of about 50 percent over the monthly rise set under a program last year. Effectively, what OPEC Plus is doing is compressing three months of planned increases into two months..

...I'd love to know why we have to sit back and take this nonsense from OPEC. We absolutely do not need them anymore and only import drips from SA...

The White House seems to think Saudi Arabia is pivotal. They have been lobbying many of the OPEC+ players to raise production for months hoping to ease oil/gasoline prices. Today there were several news organizations reporting that officials said Biden would visit SA this month.

At the moment, perhaps Biden considers SA the lesser of evils after strong words against Saudi Arabia and Mohammed bin Salman over the last few years - perhaps why SA has been less flexible until now.

 

[bruce4000]

US crude report for last week was a mirror image of the previous week. Production sitting precisely unmoved, and excess supplies only shifting with variance in the level of export. The very definition of price gouging.

We are fully reopened and producers seem unwilling to move production back to anywhere near where we left off in 2020. A tiny 600kb/d increase to 12.5Mb/d would crumble this entire market. And so we continue to wait for this oil trade to break.

If I didn't know any better, I'd say the world economy is rigged to print oil & gas profits!

I'd like to see Biden double his strategic reserve release from 1Mb/d(really more like 600kb/d) to an actual 2Mb/d. And why not? The nation would profit something like $100M per day! We certainly don't need a 1992 style strategic reserve anyway. If we want more oil, we can double our fracking output in 30 days if WWIII hits.

Buy low, sell high right!

 

[TheTalkingMule]

This is quite a piece of work, not exactly sure how they got it done. Massive effort to trace the impact of transitioning off fossil fuels.

Stranded fossil-fuel assets translate to major losses for investors in advanced economies - Nature Climate Change

The necessary and rapid transition to a low-carbon economy will lead to massive stranded assets, which could risk the stability of financial markets and the economy. Through a global equity network, most risk and responsibility is owned by investors, such as pension funds, in developed countries.

www.nature.com

@jhm always insists the bankruptcy of oil & gas won't end the world. I'm not so sure.

Lot's of fun data points in that link for you nerds.

 

[TheTalkingMule]

Some more rumblings of a Saudi/Russia break up? China has been soaking up tons of cheap oil from Russia and now the Saudis are sending them a message perhaps?

China gets less oil from Saudi Arabia as the OPEC leader ships more barrels to other parts of Asia

Strong refining margins meant July supplies of Saudi oil were particularly attractive for customers in Asia, Bloomberg reports.

markets.businessinsider.com

So Saudi exports to China are being limited(or perhaps aren't needed?) and exports to the US have essentially dropped to nothing. Where again is this supply shortfall we keep hearing about?

Russia is selling for pennies on the dollar and the Saudis aren't really needed.

 

[Doggydogworld]

Where again is this supply shortfall we keep hearing about?

Europe is buying from Saudi instead of Russia. Saudi thus has less for China. So China buys from Russia.

In theory this shell game has zero net effect on supply. In reality if Russia sends tankers on 32 day trips to China instead of 4 day trips to Europe their fleet throughput drops 87.5%. An extreme example, yes, but as we've seen with so many other items supply chain disruption creates shortages and high prices. Oil is no exception.

You insist Russia exports have not declined. But some oil simply isn't getting through. And the barrels that do get to market take a lot longer to arrive.

 

[TheTalkingMule]

You insist Russia exports have not declined. But some oil simply isn't getting through.

Says who? All I'm reading is China, Italy, India, and everyone in-between is snatching up cheap Russian oil like mad. I'm of the opinion that when there's money to be made, it will generally be made. Supply and demand side alike.

Entire fleets of shady Greek operators are already setting up tanker to tanker swapping, probably to "relabel" Russian crude and sell to anyone other than the US.

The few articles I've seen addressing supply say Russia has ramped back up from their early war dip.

And the barrels that do get to market take a lot longer to arrive.

Meh. They still arrive.

All these points would have merit if demand hadn't already peaked, with dwindling chance of recovery.

We have been structurally oversupplied globally, and especially within the US, since 2015. It took a pandemic and a war to spike futures, but IMO they've taken the trade waaaay too far.

 

[TheTalkingMule]

OPEC preemptively cutting demand expectations for 2023 just ahead of the first IEA estimate due out today.

Funny quote:

"Even if it is only 1 million bpd, that is still growth and not a peak," the delegate said of the outlook for next year.

Exclusive: OPEC sees global oil demand growth slowing in 2023, sources say

World oil demand growth will slow in 2023, OPEC delegates and industry sources said, as surging crude and fuel prices help drive up inflation and act as a drag on the global economy.

www.reuters.com

So all we need to see now is 2022 actual consumption to come in lower than expectation and that leaves us with 2024 or maybe 2025 as potential peak demand years.

2019 remains a >50% chance of being the historical peak for global crude demand.

 

[jhm]

Plastic-munching superworms offer hope for recycling

The key to transforming recycling could lie in the gut of so-called superworms, researchers say.

www.bbc.com

This is a bit off topic, but I'm curious about this. Apparently there are bacteria, fungi, beetles, and now superworms that are able to feed on different kinds of plastic. The sought after commercialization is to be able to learn the biochemistry the breaks down the plastic naturally and somehow harness that for plastic recycling. That would be nice, but I'm thinking, hold up, there are a bunch of different species that can already consume plastics! I'd love to see a more ecological approach here. How could we encourage an entire plastics ecosystem, wherein multiple species are able to breakdown all forms of plastic. Eventually, evolution will do this. We could have an entire plastic gyre ecosystem to much away at the plastic menace. Maybe scientists could help speed up the evolutionary processes of the late plasticene era.

I'm not sure if this is helpful to halting climate change because critters thar consume plastic will release carbon as CO2 that was locked up in the plastic. But there are many other ecological reasons why it is necessary for there need to be organisms that can break down plastic already in the environment. During much of the Coniferous period few species could degrade the lingin and cellulose in trees. So undegraded organic matter just piled up form coal reserves. Eventually fungi and other microbes evolved to consume this material, and it is possible that this was part of climate change at the end of the Carboniferous. So what happens as organisms evolve to consume all this plastic all over the planet?

 

[jhm]

OPEC preemptively cutting demand expectations for 2023 just ahead of the first IEA estimate due out today.

Funny quote:

Exclusive: OPEC sees global oil demand growth slowing in 2023, sources say

World oil demand growth will slow in 2023, OPEC delegates and industry sources said, as surging crude and fuel prices help drive up inflation and act as a drag on the global economy.

www.reuters.com

So all we need to see now is 2022 actual consumption to come in lower than expectation and that leaves us with 2024 or maybe 2025 as potential peak demand years.

2019 remains a >50% chance of being the historical peak for global crude demand.

Oil demand, "not a peak"

 

[jhm]

https://twitter.com/x/status/1536668049515978752

Nice thread from Auke Hoekstra on how quick the transition to eTrucks will be. Suggests diesel truck will be a small niche by 2030, which could be too conservative still. Transition primarily driven based on energy savings and price differential. Auke overlooks vehicle autonomy, which has the potential to create a massive TCO cost differential and severely punish fleet operators that drag their feet.

In Europe there is a strong case for 750 km (466 mile) range vehicles. 750 km looks to cover more than 95% of daily trips with a single charge cycle for most fleet operators.

 

[TheTalkingMule]

Good weekly US crude report today if you're looking to bring down futures and break this "inflation".

US production to ked up a tiny bit to 12Mb/d for the first time since the pandemic started. Still below our 13.5Mb/d rate from just before.

Exports way up. Crude supplies up(equal to the SPR release). Overall supplies relatively flat for the 4th week in a row.

Now with this damaged LNG plant we've lost a huge chunk of our ability to export LNG for 2022.....and that gas needs to go somewhere. That LNG will instead offset ride demand as some of the products produced with methane are also produced from crude oil.

Good stuff all around. This SPR release plan is working and I see no way out for Wall Street and London oil traders. Eventually it's gonna come crashing down, and it should be quite dramatic. Especially is the US "driving season" never materializes because gasoline is too expensive and cars are now more efficient (or EVs).

 

[TheTalkingMule]

And now we're starting to see some actual documentation of Russian oil flows, disrupted by sanctions, simply being thrown onto boats and sold elsewhere.

Imports of Russian crude by China and India are up 1Mb/d compared to pre-war levels. Turkey has doubled their imports, all the other regional players who don't care about Putin's actions have shown similar doublings.

Basically, all the Russian crude is still getting to market.

This, combined with the WH plan of strategic reserve release and demand list to higher fuel prices, is throwing a massive glut of crude onto the market.

If(when) the various players try to bring production back up near precovid levels, the math will start to look really really bad. And then when the wider market capitulates to the idea global demand peaked back in 2019.....Lord only knows what happens. Chaos most likely.

Russia seaborne oil exports at 3-year highs despite sanctions shake-up

Russian seaborne crude exports remained at post pandemic highs in the first half of June as India and China continued to snap up discounted supplies despite tightening Western sanctions on Moscow.

www.spglobal.com