Flotilla of Saudi Oil Threatens to Worsen U.S. Supply Glut

[ceo_energemsier + 1,818]

2 hours ago, RSD said:

It seems like a lot of these sensational articles have no idea of the oil market, refinery capacities etc and just write stuff that sounds alarming to anyone with no knowledge of the industry.  "20 Tankers heading to Texas" - if the dumbass writers had half a clue they would know that a VLCC holds 2 million barrels, and the Motiva refinery sucks a VLCC dry every eighty hours (3 1/3 days) - and the Motiva refinery can't take Permian crude as it isn't configured for that - it is specifically set up for Arab Light.  So do the maths and that means that Motiva takes almost ten VLCC's per month - so there's half of the highly alarming fleet of 20 tankers accounted for already.  Of the remaining ten tankers, probably 2 or 3 will be filling storage at Motiva, and the rest will be cargoes that were already sold into LA - remembering that a lot of larger refineries in LA are owned by companies that are refiners but not oil producers - e.g. Marathon etc

I can assure you that the Saudis wouldn't be stacking tankers of unsold crude off the U.S. coast waiting to find buyers - it would all have been sold before it was loaded at Ras Tanura.

One would hope that if this guy is the president of an oil company in Texas that he would know enough about the oil market in Texas to know that Motiva can't take Permian oil...

 

Exactly, there is a lot of bloviation in the article. How many barrels per day does Latigo produce that they have to be concerned about their barrels being replaced by Saudi barrels?

You are correct that Motiva uses that much oil in a few days and more than likely most of those VLCC's will be offloaded and the oil will go to Motiva.

[Tom Kirkman + 8,860]

21 hours ago, BLA said:

EVERYONE KNEW HILLARY WOULD CRUSH TRUMP.

likewise

EVERYONE KNOWS TRUMP WILL CRUSH BIDEN.  

 

Please oh please oh please let there be a live, 1 on 1 debate between Biden and Trump. 

Acosta can be moderator to add to the fun.

[ceo_energemsier + 1,818]

7 minutes ago, Tom Kirkman said:

Please oh please oh please let there be a live, 1 on 1 debate between Biden and Trump. 

Acosta can be moderator to add to the fun.

You mean, Sleepy Joe? hahaha

🤣

https://www.yahoo.com/news/biden-stumbles-televised-interview-coronavirus-192859533.html

[ceo_energemsier + 1,818]

(Bloomberg) -- How low can you go? That seems to be the question bothering the world’s big-three oil forecasting agencies as they grapple to come to terms with the size of the slump in oil consumption triggered by the international response to the Covid-19 virus.

The International Energy Agency, the Organization of Petroleum Exporting Countries and the U.S. Energy Information Administration have all updated their oil market forecasts in the past week and they make grim reading. As recently as February, all three saw the world’s thirst for oil increasing by close to 1 million barrels a day this year. Now they are projecting a drop in annual average demand of anywhere between 5 million barrels a day and more than 9 million.

The IEA is the most bearish of the three agencies by some margin. Having been the least optimistic of the three about the strength of growth earlier in the year, it’s now way out in front of the others in its estimation of the demand destruction caused by the grounding of planes, parking of cars and suspension of large parts of the economies in much of the world.

On an annual average basis, the Paris-based IEA now expects global oil demand to be 9.3 million barrels a day lower this year than it was last year. That’s equivalent to losing the entire consumption of India and the whole of Africa. OPEC is a little less gloomy, seeing demand falling year-on-year by 6.85 million barrels a day, while the EIA looks positively optimistic, with its drop of 5.25 million barrels.

But if you think the annual average figures are bad, the quarterly ones are truly horrifying.

The IEA sees a loss of oil demand in the current quarter that’s equivalent to the entire consumption of the U.S. and Canada, or about 23 million barrels a day. The EIA and OPEC are not quite so gloomy, but even they see a drop greater than all the oil used in France, Germany, Italy, Spain, the U.K. and Japan.

All three expect things to get better, or at least not to be quite so bad, in the second half of the year. By then the IEA and OPEC agree that global oil demand will (only) be down by about 5 million barrels a day compared with the same period last year. OPEC and the IEA have very similar views on oil demand in the second half of 2020, while the EIA is noticeably more optimistic. That optimism may reflect the views of an administration that seems determined to ease the lockdown on its citizens as soon as possible.

In the face of these demand forecasts, it’s little surprise that the OPEC group of countries agreed their biggest-ever output cut and managed to bring almost all of their OPEC+ allies along with them. It’s also clear that the cuts by themselves are not nearly big enough to offset the immediate slump in demand.

If the OPEC members adhere strictly to their part of the deal -- which is itself a tall order -- the group will pump about 23.4 million barrels a day in May and June, assuming the three members exempt from the cuts -- Iran, Libya and Venezuela -- continue pumping at last month’s levels. That’s down from a possible 31.8 million barrels a day in April, if Saudi Arabia, Kuwait and the U.A.E. all boost output as they have threatened until the cuts come into effect. That would give an average second-quarter production level of 26.2 million barrels a day.

Comparing that production level with the three agencies’ assessments of the world’s need for OPEC crude in the second quarter reveals the alarming size of the potential stockbuild. OPEC’s own supply demand forecast suggests that stockpiles will build at an average rate of 6.5 million barrels a day this quarter, while the EIA sees them filling at a daily rate of 8.6 million barrels.

But the IEA sees the world needing just 8.5 million barrels a day of crude from OPEC in the second quarter. That would be equivalent to Saudi Arabia pumping in line with its agreed target in April as well as for May and June and none of the group’s other members pumping anything at all.

Assuming the deal is implemented in full from May 1, the IEA’s numbers imply global stockpiles building at an average rate of 17.7 million barrels a day during the whole of the second quarter. That would require 1.6 billion barrels of storage space for crude by the end of June.

On the basis of those figures, even with the full OPEC+ cuts and the loss of an additional 4.5 million barrels a day of non-OPEC supply, oil prices will still have to fall far enough to persuade more producers to shut in more production before we run out of places to store all the crude that nobody wants.

[Dg56 + 16]

5 hours ago, RSD said:

It seems like a lot of these sensational articles have no idea of the oil market, refinery capacities etc and just write stuff that sounds alarming. 

From what I could find in vessels tracker website, the flotilla is just a flotilla, not an armada. 

Or an armada-geddon!

(to sensationalise it)

It seemed like regular shipments sent early. I agree with you. 

Stay cool, keep clamp and fly low. 

[ceo_energemsier + 1,818]

LONDON (Reuters) - Traders are storing an estimated record 160 million barrels of oil on ships - double the level from two weeks ago as they seek to tackle a glut of stocks created by a slide in global demand from the coronavirus, shipping sources say.

Organization of the Petroleum Exporting Countries (OPEC) and other producers including Russia have agreed a record cut in output from May of 9.7 million barrels per day, or almost 10% of global supply, to help support prices and curb oversupply.

At the same time traders have rushed to find storage on land and at sea in what is believed to be the biggest oil glut in history.

Shipping sources said oil held in floating storage on tankers had reached at least 160 million barrels including 60 supertankers, known as very large crude carriers (VLCCs), which can each hold 2 million barrels.

This compared with 25 to 40 VLCCs already chartered with storage options at the start of April and fewer than 10 VLCCs in February, the sources said.

Smaller tankers were also being used, which was also boosting volumes being held at anchor, they added.

The last time floating storage reached levels close to this was in 2009, when traders stored over 100 million barrels at sea before offloading stocks.

"This is an unprecedented time in the history of tankers and while VLCC tanker storage is garnering the headlines, smaller crude and product tankers are also being used for storage," Gregory Lewis, shipping analyst with global financial services group BTIG, said in a note this week.

Locations typically include the U.S. Gulf and Singapore, where major oil hubs are situated.

The crude market is currently trading in what is known as contango, where forward prices are higher than immediate prices. This market structure encourages traders to park barrels in storage in the hopes of selling them for a profit later.

There are over 770 VLCCs in the world and analysts have estimated as many as 100 to 200 supertankers could be deployed for floating storage in coming months.

"The eventual wind down of this inventory glut will be most painful to tanker demand, but in the meantime floating storage remains the only outlet for a mismatched production and consumption backdrop," said Jonathan Chappell with investment banking advisory Evercore ISI.

[BLA + 1,666]

On 4/18/2020 at 1:22 PM, ceo_energemsier said:

Exactly, there is a lot of bloviation in the article. How many barrels per day does Latigo produce that they have to be concerned about their barrels being replaced by Saudi barrels?

You are correct that Motiva uses that much oil in a few days and more than likely most of those VLCC's will be offloaded and the oil will go to Motiva

Motiva is running at 60% utilization and going down more. That equals 5 to 6 days to go thru a VLCC.  YOU THINK THAT OIL WILL BE UNLOADED AT MOTIVA.  THEY HAVE STORAGE FOR 40 MM BBLS ?   NO.

Edited April 19, 2020 by BLA

[Gerry Maddoux + 3,627]

^

Unfortunately, this is beginning to smell bad at home. 

It has been obvious for a month that the only cure for this burst of aggression by the Saudis is to restrict them, and the only possible way to do that is to emplace a tariff. I don't like tariffs--didn't like them when they were written on China--but either that or an outright ban are the ONLY possible ways to salvage the US oil industry. 

I know most people don't want tariffs. And I can hang on if nothing is done, but this is ruinous and will not end well. Iran, Brazil, Venezuela, Nigeria and even Russia are on the ropes with this. Russia likes to talk a good game but they're making a tiny fraction of what they need to break even. 

During the darkest time for the world, Saudi Arabia took steady aim at arguably the most critical industry in the US. When we were reeling, they moved in for the kill. And so far, not a damn thing has been done to counter it. Nothing. Nada. Fiddle on, Nero.

Let me remind you, though. Yesterday, when oil slipped 10%, the big oil ETF (XLE) was up 10.62%. Someone is making a huge gamble that oil is about to get a shot in the arm. I don't know who that someone is. But since the Saudis have spent $1.5-2B on European oil stocks, I wouldn't be surprised to learn they were the big block buyers. Now ask yourself, how is all this happening? The Saudis are going about confidently at a time when they should, theoretically, be ruining their dusters.  

[BLA + 1,666]

19 hours ago, Gerry Maddoux said:

^

Unfortunately, this is beginning to smell bad at home. 

It has been obvious for a month that the only cure for this burst of aggression by the Saudis is to restrict them, and the only possible way to do that is to emplace a tariff. I don't like tariffs--didn't like them when they were written on China--but either that or an outright ban are the ONLY possible ways to salvage the US oil industry. 

I know most people don't want tariffs. And I can hang on if nothing is done, but this is ruinous and will not end well. Iran, Brazil, Venezuela, Nigeria and even Russia are on the ropes with this. Russia likes to talk a good game but they're making a tiny fraction of what they need to break even. 

During the darkest time for the world, Saudi Arabia took steady aim at arguably the most critical industry in the US. When we were reeling, they moved in for the kill. And so far, not a damn thing has been done to counter it. Nothing. Nada. Fiddle on, Nero.

Let me remind you, though. Yesterday, when oil slipped 10%, the big oil ETF (XLE) was up 10.62%. Someone is making a huge gamble that oil is about to get a shot in the arm. I don't know who that someone is. But since the Saudis have spent $1.5-2B on European oil stocks, I wouldn't be surprised to learn they were the big block buyers. Now ask yourself, how is all this happening? The Saudis are going about confidently at a time when they should, theoretically, be ruining their dusters.  

Wouldn't be the first time MBS or Saudi Wealth Fund made a bad decision.

Edited April 19, 2020 by BLA

[ceo_energemsier + 1,818]

2 minutes ago, BLA said:

Wouldn't be the first time MBS or Saudi Wealth Find made a bad decision.  Seems it's the only decision they know how to make.  

Saudis bought stock in 4 European oil companies.  Looks more like a trade as opposed to an investment.  I would bet Saudis thought that the faux 10 mm bbls cut would send oil prices higher,  thus oil companies higher.  

I doubt tariffs work for many reasons.  The U.S. needs to know exactly how many tankers and what grade of oil.  Then Trump needs to call MBS.  

Lot of faux grand standing!!!! The US will know exactly how many tankers and the cargo manifest before they enter any US port(s).

 

[Gerry Maddoux + 3,627]

1 minute ago, BLA said:

Then Trump needs to call MBS.  

And say what? 

We're way past that. 

Again, oil futures were down 10% on its way down further; oil stock ETF was up 10%. Those two things don't live in the same neighborhood. 

[ceo_energemsier + 1,818]

2 minutes ago, Gerry Maddoux said:

And say what? 

We're way past that. 

Again, oil futures were down 10% on its way down further; oil stock ETF was up 10%. Those two things don't live in the same neighborhood. 

We are a long ways away from any meaningful, sustainable , long term (90 days or +)oil upward swing back into the upper 30s/lower 40s for WTI benchmark. We have to live, function, operate and make $$$ within this environment.

Unless MBS says OK we are completely shutting off our spigots and so do others, not much is going to change.

When this CoronaSchitt is over, when demand comes back, roaring demand, then we will see the uptick in oil prices. Demand will crawl upwards not leap.

Till then relax and enjoy and be healthy and safe!!

 

[RSD + 41]

If Trump does put a tariff on Saudi oil and the Saudis respond by idling Motiva and putting the workforce on furlough how will that look for Trump?

[BLA + 1,666]

19 hours ago, Gerry Maddoux said:

And say what? 

We're way past that. 

Again, oil futures were down 10% on its way down further; oil stock ETF was up 10%. Those two things don't live in the same neighborhood. 

 

19 hours ago, Gerry Maddoux said:

And say what? 

We're way past that. 

Again, oil futures were down 10% on its way down further; oil stock ETF was up 10%. Those two things don't live in the same neighborhood. 

Trump should say he's withdrawing Troops  . 

  

Edited April 19, 2020 by BLA

[Tom Kirkman + 8,860]

16 hours ago, Dg56 said:

Stay cool, keep clamp and fly low. 

Thanks for the advice.  I'm trying to stay cool, clamped and collected during the panic.

[Dan Warnick + 6,100]

1 hour ago, Tom Kirkman said:

Thanks for the advice.  I'm trying to stay cool, clamped and collected during the panic.

Parking in restricted zones again, eh?

[Tom Kirkman + 8,860]

8 minutes ago, Dan Warnick said:

Parking in restricted zones again, eh?

Actually I'm on 2 square miles in pretty much the middle of nowhere.  And it includes part of a winding river and two parcels of 40+ acre woods.  Lots of deer and rabbits.

When I go shopping at the nearest grocery store, I refuse to wear a mask, and give a big grin to anyone who glares at me for not wearing a face mask.

Social Mischiefing.  Smiling at everyone when I go grocery shopping has a bizzare effect.  Most people like it, but it amuses me endlessly when a handful of sourpusses get upset at seeing a cheerful smile, and they double down on being pissed off.

Life is good  : )

[Dan Warnick + 6,100]

2 minutes ago, Tom Kirkman said:

Actually I'm on 2 square miles in pretty much the middle of nowhere.  And it includes part of a winding river and two parcels of 40+ acre woods.  Lots of deer and rabbits.

When I go shopping at the nearest grocery store, I refuse to wear a mask, and give a big grin to anyone who glares at me for not wearing a face mask.

Social Mischiefing.  Smiling at everyone when I go grocery shopping has a bizzare effect.  Most people like it, but it amuses me endlessly when a handful of sourpusses get upset at seeing a cheerful smile, and they double down on being pissed off.

Life is good  : )

I knew all that; I come from central Illinois and there's not much difference (not that much).  But I thought with your Governor (mine too) that you might get clamped for parking on the side of Rural Route 1!!  😉

[ceo_energemsier + 1,818]

SINGAPORE (Reuters) - Middle East oil producer Abu Dhabi National Oil Co (ADNOC) has informed term buyers it will reduce the supply of crude in May for all four crude grades, two sources with direct knowledge of the matter told Reuters on Tuesday.

ADNOC will cut the supply of its Murban and Upper Zakum crude by 15% in May, and reduce the supply of its Umm Lulu and Das crude by 5%, the sources said, citing a letter issued by ADNOC to buyers on Tuesday.

ADNOC could not be immediately reached for comment.

The move followed agreement of a record cut in output by the Organization of the Petroleum Exporting Countries (OPEC) and its allies led by Russia to prop up oil prices amid the coronavirus pandemic.

As billions of people around the globe stay at home to slow the spread of the virus, physical demand for crude is drying up, creating a global supply glut. Refiners are processing much less crude than normal, so hundreds of millions of barrels have gushed into storage facilities worldwide.

"As directed by the UAE Government and in line with the recent OPEC+ agreement, ADNOC has committed to reduce its oil production," the producer said in the letter to buyers.

In a similar move, top Gulf oil exporter Saudi Aramco has allocated around 4 million barrels per day of crude oil to its Asian customers, which is lower than its full contractual volumes to Asia by about 2 million bpd, a Saudi oil source familiar with the company's plans told Reuters last Friday.

Oman has also told its oil producing companies to cut 200,000 barrels per day starting from May 1 until the end of June and will inform its customers of the same plan, its oil ministry said.

U.S. crude oil futures collapsed below $0 on Monday for the first time in history, ending the day at a stunning minus $37.63 a barrel as desperate traders paid to get rid of oil.

 

[ceo_energemsier + 1,818]

Trump to consider halting Saudi oil imports to help ease U.S. glut

 

https://autos.yahoo.com/trump-consider-halting-saudi-oil-122700348.html

 

[Jan van Eck + 7,558]

On 4/17/2020 at 8:39 PM, BLA said:

No need to insult people personally. I only do so when attacked and return in kind.

Probably not a good idea.  

[HermitMunster + 146]

Why don't we just bomb them? Why are we friendly with them when they are the ones creating all of the Salaf Jihadists? How do people think terrorism is funded? Cupcakes? Saudi Aramco is the most profitable company in the world. I don't get it, man. Even Trump admitted many years ago that KSA was the biggest terror threat in the world and of course he changed his tune to Iran years later. It is no longer 1945. 

[BLA + 1,666]

36 minutes ago, Jan van Eck said:

Probably not a good idea.  

Why ?

[Gerry Maddoux + 3,627]

On 4/18/2020 at 10:05 PM, RSD said:

If Trump does put a tariff on Saudi oil and the Saudis respond by idling Motiva and putting the workforce on furlough how will that look for Trump?

Very good.

 

On 4/19/2020 at 5:42 AM, BLA said:

Trump should say he's withdrawing Troops  . 

Precisely, I say with the possible risk of it being said I'm "emotional." 😂

[El Nikko + 2,145]

Ahem

HAHAHAHAHHAHHAHAHAAAAA!!!!!!

Good

https://www.bloomberg.com/news/articles/2020-04-21/-this-has-changed-everything-saudi-economy-shaken-by-oil-crash