I just listened to Jeff Currie's bullish oil talk for 2023.
Below is the pitch and the real data!
Consider it a X-mas gift to my followers. Merry Christmas to you all.
1/n @UrbanKaoboy @simon_ree
Below is the pitch and the real data!
Consider it a X-mas gift to my followers. Merry Christmas to you all.
1/n @UrbanKaoboy @simon_ree
Jeff: "China will re-open and demand will jump."
Well, China's consumption in Dec matches 2021 levels and is near an ATH ALREADY while it will have to digest the largest property bubble in history of mankind in the coming years.
My view: China went ex crude growth in 2021
2/
Well, China's consumption in Dec matches 2021 levels and is near an ATH ALREADY while it will have to digest the largest property bubble in history of mankind in the coming years.
My view: China went ex crude growth in 2021
2/
More importantly, China's product stocks may reach tank-tops if refiners do not reduce runs or increase product exports.
The latter is not easy. It needs (clean) vessel capacity to ship diesel to new markets such as Europe or Africa. Don't expect miracles.
3/n
The latter is not easy. It needs (clean) vessel capacity to ship diesel to new markets such as Europe or Africa. Don't expect miracles.
3/n
Meanwhile, China's own crude production is at an ATH.
It also imports 2.5mbpd more crude in Dec vs July (!), an ATH due to Russian discounts. How much more shall it import?
Refiners run near an ATH at 15mbpd without gross margins. What should "re-open"? It is open!
4/n
It also imports 2.5mbpd more crude in Dec vs July (!), an ATH due to Russian discounts. How much more shall it import?
Refiners run near an ATH at 15mbpd without gross margins. What should "re-open"? It is open!
4/n
How much MORE crude do you think Chinese refiners will import in Q1 (below) while risk hitting PRODUCT tank-tops & without making money?
Why would the CCP allocate RECORD crude import quotas just to support international prices when it does NOT need more, but less crude?
5/n
Why would the CCP allocate RECORD crude import quotas just to support international prices when it does NOT need more, but less crude?
5/n
It gets better: If one has a closer look at Chinese consumption, the only laggard is jet while HF data suggest diesel & gasoline was holding up nicely.
Was because in Dec gasoline went lower, not higher! Why?
6/n Source: Capital One
Was because in Dec gasoline went lower, not higher! Why?
6/n Source: Capital One
CapitalOne's Laskhmi Sreekumar nailed this:
"Chinese HF product demand is tracking LOWER m/m even with a pop in jet fuel demand. Remember I told you guys, what JET GAINS, GASOLINE (and sometimes HSRD, high speed road diesel) LOSES."
Cheers @UrbanKaoboy for introducing us!
7/n
"Chinese HF product demand is tracking LOWER m/m even with a pop in jet fuel demand. Remember I told you guys, what JET GAINS, GASOLINE (and sometimes HSRD, high speed road diesel) LOSES."
Cheers @UrbanKaoboy for introducing us!
7/n
Message: as refined products have no place to go, China will likely reduce Q1 runs & in all likelihood (nothing is every certain) reduce oil imports.
By how much? How about by the amount Russian exports reduce (500-700kbpd). But don't be surprised if it is 1-1.5mbpd.
8/n
By how much? How about by the amount Russian exports reduce (500-700kbpd). But don't be surprised if it is 1-1.5mbpd.
8/n
Jeff: "Stocks are low".
True for US (left chart; crude incl SPRs). What about the RoW?
Globally, crude stocks reduced by 120mb since May (2nd chart) but demand cover in days (right chart) went ABOVE 2021 since Sept as demand dropped (now 32.7 vs. 31.8 days in 2021).
9/n
True for US (left chart; crude incl SPRs). What about the RoW?
Globally, crude stocks reduced by 120mb since May (2nd chart) but demand cover in days (right chart) went ABOVE 2021 since Sept as demand dropped (now 32.7 vs. 31.8 days in 2021).
9/n
Looking at "demand cover in days" number in a historic context should help you understand how the bullish crude trend is broken.
Is it straight bearish? No, crude is what I call in a "flattish" market. Not a bull, not a bear.
So why am I a bear?
10/n
Is it straight bearish? No, crude is what I call in a "flattish" market. Not a bull, not a bear.
So why am I a bear?
10/n
I have a bearish tilt because petroleum products are oversupplied while demand for products is trailing 2021 Q4 numbers pretty much everywhere except in US & Brazil. Yes, it's called demand destruction & it's real.
Consequently, global product stocks are close to an ATH.
11/n
Consequently, global product stocks are close to an ATH.
11/n
In fact, @OilX's nowcast suggests petroleum product inventories may reach an ATH in December 2022 globally.
Now, that is NOT bullish even if China re-opens twice!
11/n
Now, that is NOT bullish even if China re-opens twice!
11/n
In summary, global crude & petroleum product stocks are going sideways or incrementally higher since May 2022.
I warned you in July. Some listened & other preferred to keep it an US-centric story. Well, it is not.
12/n Global Crude & Product stocks, all in!
I warned you in July. Some listened & other preferred to keep it an US-centric story. Well, it is not.
12/n Global Crude & Product stocks, all in!
I hope this short thread will help some to "walk more carefully" and while we may enter one of the most challenging macro environments in decades.
Finally, if & when the data changes, so will we. Nothing is ever static. So should you.
13/n
Finally, if & when the data changes, so will we. Nothing is ever static. So should you.
13/n
Finally, please note that I will tweet less about crude in 2023.
Instead, I will continue sharing data on the EU energy landscape to help others understand the issues at hand.
Take care out there. Merry Christmas ..!
14/n
Instead, I will continue sharing data on the EU energy landscape to help others understand the issues at hand.
Take care out there. Merry Christmas ..!
14/n
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