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Date Posted: 9:22:15 4/26/23 Wed
Author: Jasper ()
Subject: Quote the Raven article on a Harris Kupperman tweet.

.
In the end, it all comes down to math. Unfortunately, given the nature of oil, precise data is impossible to come by. Instead, I’m forced to use some back-of-the-envelope internal estimates that are likely to be directionally correct, if empirically incorrect. With that in mind, I believe that oil investors have now suffered through the following since the late summer of 2022:

China locking down over COVID for approximately 200 days with a demand loss of 2.5 million barrels per day (bbl/d) or 500 million barrels (bbl) throughout Asia

Global Strategic Petroleum Reserve releases in excess of 300 million bbl

Russia dumping approximately 150 million bbl of crude and refined products before sanctions took hold

A warm winter in Europe and North America which reduced heating oil and propane demand by approximately 100 million bbl

In total, we’re looking at a swing of approximately 1.05 billion barrels over a period of roughly 200 days, or 5.25 million bbl/d. With that in mind, the surprise shouldn’t be that oil prices declined under the weight of this massive swing. Rather, the surprise should be that global commercial inventories barely increased. Where did those barrels go? They got consumed. What’s more, they got consumed during a period where increasing interest rates incentivized many consumers to run down their existing inventory, inventory that is not tracked by the various acronym agencies tasked with tracking inventory, adding a further headwind to global imbalances.

Now, we find ourselves at a moment in time when the first three of the headwinds noted above are reversing, and no one can predict the weather. Meanwhile, global demand grows every year. If global commercial inventories could barely increase with these extreme factors in play, what happens now that they’ve reversed? What happens if there’s an accident on the supply side for a change?

https://quoththeraven.substack.com/p/an-energy-crisis-wrapped-in-a-banking

Last edited by author: Wed April 26, 2023 09:27:35   Edited 1 time.

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