Good analysis. Two things you might want to consider: the SPR draw is meaningless at this point, because it has slowed from a nameplate capacity of 4.4 million barrels per day, down to 0.8. So it isn’t really a factor in the 14 million barrels per day deficit. What is a factor, however, is the worldwide reduction in refining capacity due to both the Iran war and the Russia war. Refining capacity, which is a surrogate for demand, is down almost 10%. That has the effect of reducing crude demand by 10 million barrels per day, which stretches the drawdown of commercial reserves for some amount of time.
I’m not sure how much refining is down because of reduced demand and how much deferred because of constrained supply. I think the latter is more likely. I think that has also contributed to record crack spreads.
Russian refineries? Yeah, I was looking at the other day. I think one issue is that Russian Urals is heavy sour and needs shadow fleet to move it around, so not likely to reduce crude price much. But demand to replace lost refinery production might increase crack spreads more.
Well crack spreads are crazy. $60 vs 70 for crude, and all refineries are running flat out. So that’s a proxy for demand, right? Hugely profitable for refiners right now.
My (much less better-informed) read on this is similar
Far too much uncertainty to call this as even *close* to “over”, no matter what the political class and futures markets are saying
Good analysis. Two things you might want to consider: the SPR draw is meaningless at this point, because it has slowed from a nameplate capacity of 4.4 million barrels per day, down to 0.8. So it isn’t really a factor in the 14 million barrels per day deficit. What is a factor, however, is the worldwide reduction in refining capacity due to both the Iran war and the Russia war. Refining capacity, which is a surrogate for demand, is down almost 10%. That has the effect of reducing crude demand by 10 million barrels per day, which stretches the drawdown of commercial reserves for some amount of time.
I’m not sure how much refining is down because of reduced demand and how much deferred because of constrained supply. I think the latter is more likely. I think that has also contributed to record crack spreads.
https://oilprice.com/Energy/Energy-General/Russian-Refinery-Disruptions-Ripple-Across-Central-Asian-Fuel-Markets.html
Russian refineries? Yeah, I was looking at the other day. I think one issue is that Russian Urals is heavy sour and needs shadow fleet to move it around, so not likely to reduce crude price much. But demand to replace lost refinery production might increase crack spreads more.
Well crack spreads are crazy. $60 vs 70 for crude, and all refineries are running flat out. So that’s a proxy for demand, right? Hugely profitable for refiners right now.
Do you think China starts buying oil again and exporting refined products in the near future?
Chinese refineries are currently importing about 1.3 million to 1.4 million barrels per day of Iranian crude oil.
Well written article