
BLKNSTY
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From today's RBN Energy, I think the refinery restarts and new builds coming online over the next few months is why crude/refined products are bearish. We often tend to focus on the U.S. refining picture, but, just like crude oil, refined products trade globally, and international closures ultimately have the same effect as domestic ones on the worldwide products market. Recent international closures have been distributed throughout the world — concentrated in developed countries, including several in Europe, as well as Japan, Singapore, Australia and New Zealand, but also in some developing economies like South Africa and Sri Lanka. Most of these capacity reductions were driven by the same forces as in the U.S., namely, poor economics as a result of the pandemic-lockdown-driven demand plunge in 2020 and 2021, as well as expectations that margins would take a long time to recover post-COVID. Of course, worries that the energy transition and policies to that end would suppress demand in the long-term also played a key role, as did some fundamental competitiveness issues at individual facilities. In today’s RBN blog, we take a closer look at the more than 2 MMb/d of international capacity closures since 2019. The first blog in this series reviewed the roughly 1.3 MMb/d of North American refinery capacity reductions that have occurred since 2019, and the additional 400 Mb/d planned to be taken offline over the next two years. But unlike in the U.S., where the refining industry had been adding capacity prior to 2019, Europe has experienced a long-term decline in refining capacity due to sluggish demand and decreased competitiveness. Since 1980, the continent’s refinery capacity (excluding Turkey and the former USSR) has fallen by almost 8 MMb/d (a decline of more than a third; stacked bars in Figure 1). Most recently, Europe lost about 3 MMb/d of refinery capacity from 2006 through 2017 (dashed red box), before a brief “European Spring,” inspired by lower crude costs and a bump in demand, led to a few years of better margins. The good times came to an abrupt end with the COVID-related lockdowns, and since the beginning of 2020, Europe has lost an additional 800 Mb/d of refining capacity through complete and partial closures. Figure 1. European Refinery Capacity. Sources: BP and RBN Refined Fuels Analytics Certainly, the negative demand environment in Europe in recent years (shown by the blue line in Figure 2) has been a major factor in the long-term rationalization trend there. Some of this is due to slower economic growth on the continent. Another major factor has been the earlier and more aggressive moves that European governments –– and ultimately even energy companies –– have made on climate change initiatives, which discourage petroleum demand and carbon-intensive industrial activity, like refining. Figure 2. European and U.S. Petroleum Demand. Sources: EIA, BP, RBN Refined Fuels Analytics As we discussed in Part 1, the U.S. refining industry has been able to respond to the slowdown in domestic demand (red line in Figure 2) by tapping into the export markets. Unfortunately, this path was unavailable to European refineries due to a number of factors, including lower size and complexity, more government regulation, and (more recently) higher natural gas and crude oil prices. The higher natural gas and crude costs for European refiners are rooted in the Shale Revolution, with the benefits of each emerging for U.S. refiners around 2008 and 2011, respectively. Further, the U.S.’s relative advantage in this area has grown significantly in the past year with Russian sanctions pushing European natural gas and crude costs even higher. All of the fully shuttered facilities in the latest round of rationalization in Europe were smaller, simpler plants that were already at risk of being shut down before the European Spring extended their lives. These facilities include: Gunvor’s 80 Mb/d and 110 Mb/d refineries in Rotterdam and Antwerp, respectively. TotalEnergies’s 110 Mb/d refinery in Grandpuits, France. Exxon’s 121 Mb/d refinery in Slagen, Norway. Eni’s 84 Mb/d refinery in Livorno, Italy. INA/MOL’s 44 Mb/d refinery in Sisak, Croatia. Neste’s 100 Mb/d refinery in Naantali, Finland. Galp’s 110 Mb/d refinery in Porto, Portugal. Others have closed older and/or less efficient “trains,” while maintaining operations at the more profitable units at their refineries. A train is defined as a single string of units used for processing crude oil into refined products. Most large refineries have multiple trains and/or redundant units and can, in many respects, be thought of as two (or more) refineries located at a single site with shared logistics, infrastructure and utilities. The most important partial closure in Europe was a 65 Mb/d capacity cut at Ineos’s Grangemouth, UK, plant. Still others have decreased crude oil capacity to increase coprocessing capacity for renewable feedstocks (primarily vegetable oils). In the U.S., standalone renewable diesel (RD) plants are more popular than coprocessing facilities because our subsidy regime favors standalone operations –– namely the $1/gal Blender’s Tax Credit (BTC), which applies only to RD produced at a standalone RD unit. In Europe, however, coprocessing and standalone RD production receive roughly the same level of incentives and subsidies, so coprocessing is more popular there. Many of these capacity reductions are smaller and more difficult to track, but companies throughout Europe have increased coprocessing in response to incentives and subsidies, as well as weak petroleum refining margins throughout 2020 and 2021. South Africa saw a considerable number of refinery closures throughout the pandemic — four refineries (including one gas-to-liquids plant) — losing 460 Mb/d of capacity over the past year and a half. South African refining margins have been falling over the past several years as facilities there have been forced to compete with new, larger, more complex export-oriented refineries in the Middle East. Two of the shuttered South African refineries are pursuing a restart in late 2022 or early 2023 (with the government desiring to purchase and restart one), but the likelihood that both will successfully resume operations remains low. In fact, it is entirely possible that neither is able to successfully restart. The country’s 45 Mb/d gas-to-liquids plant, located in Mossel Bay, was also forced to close due to a lack of natural gas feedstock as the reservoir supplying the facility has been depleted. In Asia, significant closures have occurred in Japan, Singapore and the Philippines. (China is a special case and will be the subject of its own blog). The Japanese refining industry has consolidated over the past decade or so and refineries have shut down –– and will continue to do so –– in line with declining domestic demand. Japan has no advantages regarding product exports –– crude has to be imported and fuel/natural gas costs are high –– so refiners see their best option as simply to produce enough fuel to supply the shrinking domestic market. Eneos (the country’s largest refiner) closed its 115 Mb/d Osaka plant in 2020 and plans to close another 120 Mb/d refinery later this year and a 125 Mb/d refinery in the fourth quarter of 2023. Shell cut the capacity of its Singapore refinery by half –– from 500 Mb/d to 250 Mb/d –– in 2020 and permanently closed its 110 Mb/d refinery in the Philippines around the same time. Sri Lanka also closed its only refinery, a 50 Mb/d state-owned facility, in late 2021 due to a shortage of funds. The Sri Lankan government is pursuing a restart, but given the current chaos in the country, success appears unlikely. Australia and New Zealand, combined, lost 371 Mb/d of refining capacity across three refineries during the pandemic, with the most recent of the closures being New Zealand’s Marsden Point refinery, which was shut down in March this year. Australia could also have plausibly seen the closure of its two remaining refineries (combined capacity of 230 Mb/d), but the government stepped in to provide financial assistance to keep them operating for at least another five years. Altogether (excluding China), the U.S. and the rest of the world have experienced more than 3 MMb/d of refinery closures since January 1, 2020, and only about 1.5 MMb/d of new capacity additions over the same time period, meaning current global refining capacity outside China is down by about 1.5 MMb/d when compared with January 1, 2020. Still, some significant new capacity is expected both this year and next, and refining capacity additions over the next 18 months are expected to exceed demand growth over the same period. Outside of China, the Middle East will add the most new capacity. Kuwait’s 615 Mb/d Al-Zour refinery is expected to start up by the end of this year, as is Oman’s 230 Mb/d Duqm plant. India will add nearly 500 Mb/d of capacity by the end of 2023 and ExxonMobil and Valero will add 250 Mb/d and 100 Mb/d, respectively, of capacity on the U.S. Gulf Coast next year. Dangote Group wants to start up its 650 Mb/d refinery in Nigeria by the end of 2022, but given the track record of refining in Africa it’s likely that this project will be delayed until at least 2023, and possibly further. Additionally, the refinery may have trouble maintaining reasonable utilization rates. There’s also the possibility for about 200 Mb/d to 400 Mb/d of refinery restarts, including those discussed above. Further, the pace of closures will undoubtedly slow down compared to what we’ve seen over the past couple years, though as we’ve noted, significant closures are still planned in the U.S., Europe and Japan for this year and next. Figure 3 shows historical and projected refining capacity additions (and contractions) at the beginning of each year as compared to January 1, 2017. The new capacity additions are clearly visible here. Figure 3. Change in Global (ex-China) Refinery Capacity vs January 1, 2017. Sources: BP, RBN Refined Fuels Analytics While these new capacity additions will go a long way towards balancing the market, the outlook for refining margins will also depend on the pace of demand growth, the resolution (or lack thereof) of the Russia/Ukraine conflict, and Chinese policy regarding refined product exports. (Russian and Chinese refineries will be the subject of an upcoming blog.) However, unless we see a complete reversal of Chinese Communist Party (CCP) policy, it appears that global refining capacity will remain tight compared to 2019 (pre-COVID) levels, but looser than it is today. As we look to 2024 and beyond, the outlook for refining capacity additions looks murkier as new project announcements slowed down during 2020 and 2021, and some planned projects were canceled altogether. Further, many companies are hesitant to make large investments in the space given the uncertain outlook for petroleum demand later this decade, but particularly after 2030. As such, if petroleum demand continues to grow somewhere close to historical rates through the rest of this decade, we could see something of a repeat of the “Golden Age of Refining,” the period of strong global refining margins preceding the Global Financial Crisis of 2007-09.
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The power outages are fundamentally because we are short dependable and dispatchable power in Texas. We can’t get it from anywhere else because we physically aren’t connected to the other power grids in the US. So our only options are generating more power in Texas (which falls on our nat gas power plant owners like NRG, Vistra, etc.) or joining the other power grids (hah). The responsibility to foresee this and manage this through the numerous tools they have available falls to ERCOT, and ERCOT alone, at the direction of the Governor. There are numerous issues as to why we are short dependable and dispatchable power. NUMEROUS. but those numerous issues all have proven solutions. some of those solutions require tough decisions which you’ll probably be villified over. but if engineering teaches you anything, you can’t keep putting bandaids on issues that can cause catastrophic effects. Which we’ve already seen that once with the lack of weatherization and frozen gas pipes. For the next 60 days between 2-8PM, we are one 2-3 GW power plant failure away from a pretty detrimental situation. That power plant failure could be cause by a number of different issues. The low hanging fruit/bandaid with asking folks to conserve electricity has already been picked. I don’t have any clue what else ERCOT is doing though. Sent from my iPhone using Tapatalk
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I mean you are a little with all this talk of maintenance being such a big issue. This isn’t a refinery or a chemical plant or liquefaction facility where you’ve got corrosion, leakage, fouling, upsets, off-spec, equipment that needs to operate at -273F and a thousand PSI, highly explosive chemicals and corrosive acids, etc across a dozen different units doing hundreds of different things. It’s 4-8 nat gas gensets running in parallel pulling 99.9% methane off a 36 inch line, a stack, a flare, a cooling tower, some heat exchangers/pumps/condensers maybe a firewater system. Any plant manager worth his salt has his spare parts on site and any competent power producing company should know that. There’s a reason why there are hundreds of electric gen coops across the country run by 12, 60 yr old dudes who have white hair, couple missing teeth, bushy mustache, a big belly, a tshirt with a front pocket filled with tiny screw drivers and a pocket protector tucked in his jeans and loves to eat at hooters cause he only gets paid 80k-120k a year. In short any nat gas power plant down because of inside the fence issues is probably incompetent. That incompetence has probably made it to the corporate level, which has been acquired by some PE firm who wants to choke out a couple more bucks and just focuses on the bottom line. The only safeguard against that incompetence is ERCOT/Abbott but that incompetent company is at least smart enough to realize that if you line the pockets of the state gov/affiliated party, not only will they go to the grave defending your company’s incompetence - they’ll fucking recover any money you’ve lost due to your own incompetence with fees/taxes/bailouts from the ratepayers! We are literally creating, incompetent and greedy power producers who, through our inability to hold those we vote for incompetent, are too big to fail. It’s really incredible how we’ve gone from a somewhat capitalist country to a oligarchy fuel by rent seeking behavior. Incredible ROI. Sent from my iPhone using Tapatalk
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You know, just asking questions. Yeah they shouldn’t have put his name in this article. This girl’s name will be reduced to a hashtag on Twitter soon and that just breaks my heart. fuck this dude, the GQP, and Fox News.
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All Encompassing Mortgage and Real Estate Thread
BLKNSTY replied to UTPhil2006's topic in Business and Markets
I hear you on this Neon but here’s my main disconnect, its tough for justify a 6% rate on a purchase where the purchase price is 50% higher than where it was 2-3 years ago. It’s a bad decision on top of a bad decision, and even if I refinance, I could be upside down on that property pretty quickly. Unless I’m totally wrong, which I admittedly can be. Need to better understand what happens when I refi tho so I have some homework to do. I know, i know the price is the price and we aren’t building homes at the pace we should so supply won’t be balanced for awhile. Here’s a question tho, at what point do investors start funneling money into commercial conversions to residential, is that even a thing? Everywhere I look I see commercial space for rent but with some zoning fixes and some capital I think solves that. -
WVA vs EPA reversed and remanded. Sent from my iPhone using Tapatalk
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https://buffalonews.com/news/local/authorities-investigating-if-retired-federal-agent-knew-of-buffalo-mass-shooting-plans-in-advance/article_bd408f18-dd39-11ec-be53-df8fdd095d6f.html Authorities investigating if retired federal agent knew of Buffalo mass shooting plans in advance A police vehicle is parked at the Tops Markets on Jefferson Avenue in Buffalo on May 15, a day after a gunman murdered 10 people and injured three others. Law enforcement officers are investigating whether a retired federal agent had about 30 minutes advance notice of a white supremacist's plans to murder Black people at a Buffalo supermarket, two law enforcement officials told The Buffalo News. Authorities believe the former agent – believed to be from Texas – was one of at least six individuals who regularly communicated with accused gunman Payton Gendron in an online chat room where racist hatred was discussed, the two officials said. The two law enforcement sources with direct knowledge of the investigation stated these individuals were invited by Gendron to read about his mass shooting plans and the target location about 30 minutes before Gendron killed 10 people at Tops Markets on Jefferson Avenue on May 14.
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I’d argue that the impact of Student Loan forgiveness is already pretty much baked in. Something like 96% of ppl with student loans haven’t made a payment in 2+ years. Sent from my iPhone using Tapatalk
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2021 - Is inflation finally back in the conversation?
BLKNSTY replied to Reagan1k's topic in Business and Markets
yeah my bad, I thought I was looking at a 20 year chart but it was just 10. So yields are at about a 12 year high with some room to run. Sent from my iPhone using Tapatalk -
2021 - Is inflation finally back in the conversation?
BLKNSTY replied to Reagan1k's topic in Business and Markets
Understandable and I do think the “underemployed” is an issue but I don’t know if I’m comfortable with how the gig economy folks are considered in these numbers. But just from my viewpoint, we’re hiring like crazy and I see help wanted signs everywhere. Sent from my iPhone using Tapatalk -
2021 - Is inflation finally back in the conversation?
BLKNSTY replied to Reagan1k's topic in Business and Markets
Collective basket of foreign currencies on market watch. We’re up 16% YOY and the chart looks like we’re right at 20 year highs. With us increasing rates while the rest of the world not, should be a steady grind up for the for the foreseeable future unless things drastically change. And even if things do drastically change, chances are those events would further strengthen the dollar. Sent from my iPhone using Tapatalk -
2021 - Is inflation finally back in the conversation?
BLKNSTY replied to Reagan1k's topic in Business and Markets
We have: an incredibly strong dollar, sustained high levels of inflation, rising interest rates, stock market off by 15% from recent highs with tech stocks down 30%, high fuel costs, very low unemployment, a record number of job openings, rising wages, stagnant economic growth, commercial real estate sitting at 40% leased, residential real estate coming off a multi-year tear, treasury rates at all time highs, a bloated fed balance sheet with a plan to shed some assets. Not including anything geopolitical/political, anything else y’all would include? Sent from my iPhone using Tapatalk -
Hopefully it’s a sign of a bottom. All in in June $450 calls Sent from my iPhone using Tapatalk
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There have been 2 days in the past 25 years when S&P 500 futures were down 3% and 10-year Treasury futures down 1%: October 9, 2008 March 18, 2020 Someone is blowing up, and this is forced liquidation. Saw on Twitter
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It ain’t that much different here chief… only thing holding it back from being this egregious is the chance of losing your tax exempt status. no cr, just want to point out that it’s pretty damn believable from where I’m sittin’ Sent from my iPhone using Tapatalk
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Off topic
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Elon Musk: Nazi traitor piece of shit [Confirmed]
BLKNSTY replied to MaybeACoordinator's topic in Daily Texan
the worlds richest man basically bought all our DMs and took the company private. Twitter doesn’t use end to end encryption on DMs so that shit is wide tf open to anyone who has access. 100% private company with minimal oversight. yeah yeah I know, what about Zuck? I don’t think that’s exactly the same - it’s a public company with a board and Zuck has at least some track record. Shareholders and fiduciary responsibility etc. yeah yeah companies are already making bank off my data but that’s keywords or some dude making $35k a year who has no beef with me reading about how I’d eat my coworkers ass on a silver plate. yeah yeah what about Bezos? I dont DM on Amazon and I could give two fucks about WP as I’ve never even visited their website. I have absolutely no doubt this shit is going to end badly. Some real sensitive DMs bout to get leaked. Genuine question, what’s stopping Elon from busting open all the DMs of anyone who’s looked at him sideways/his competitors/governments and politicians capable of being blackmailed and fucking up their shit? This some NSA level access but at least we can chalk that up to terrorism. I know the legal system is there but this mf really called a guy a pedo on Twitter and still one the defamation suit. I’m in for the ride though baby, crank up that simulation shit baby -
2021 - Is inflation finally back in the conversation?
BLKNSTY replied to Reagan1k's topic in Business and Markets
we are producing more nat gas today than at any point in our history. US production is up 2.5x since 2012, the last time we had pricey nat gas for any extended period of time. so there’s that nugget. Sent from my iPhone using Tapatalk -
bro let’s not even talk about the 3 years of fucking useless trade wars and tariffs. Nope that didn’t impact inflation. /s China is below their nonbinding ag trade thresholds, Canada ain’t buying our milk, Mexico ain’t buying our cars, and we still ain’t making any steel stateside.
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Oil at $110+ for any extended period of time accelerates demand destruction tremendously and Russia fucking cemented that for at least 2 to 3 years. I don’t think that’s good for O&G. We can ease domestic hurdles all we want but domestic motor gasoline consumption, which is by far the biggest consumer of crude oil, has been relatively flat at 9 million barrels a day since around 2008. the odd straw man argument isn’t really a straw man. Dems need a reason to ease domestic production or they’ll be facing an internal revolt. but if I’m a Dem, I wouldn’t do that without knowing for sure gasoline prices will come back down. The math says easing domestic hurdles alone aren’t going to do shit cause none of it will stay here. So not only will they get dragged for high gasoline prices from both the right and the left, it’ll look like they turned their back to their treehugger base. Literally a lose lose. At least with the status quo they can keep some of their base happy. Otherwise the dems can point to Russia as a reason to switch to electric, and at these oil prices + tax breaks and EV subsidies - it’s a damn good proposition. Sent from my iPhone using Tapatalk
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the reason as to why not both is that it’s just a hypothetical negotiation between the left and the right in terms of what can we do to help bring down gasoline prices today. In this hypothetical situation in which you were the single decision maker for the entire o&g market, would you take a deal that said we’ll ease domestic production hurdles in return for reinstating the crude oil export ban? If I represent the o&g folks, to me, it’s not even a question. I’m fighting tooth and nail to never ever ever give up that ability to export crude oil. At the same time I’d be controlling the narrative in the sense that I’d be paying my senators to say the domestic hurdles are the reason why gasoline and nat gas prices are high. It’s too easy. A+B=C You look at the WTI/Brent spread from 2011 to now, it’s basically gone from $10-$20 to $2-$5. We have literally pushed crude oil to more of a global commodity when at least in the past we had a little delta. I don’t think that’s a good thing for Americans in general. I think that is a direct result of the revocation of the crude oil export ban. We are more exposed to KSA and OPEC now than we ever have been, and even if we opened the production spigot by easing domestic hurdles, it wouldn’t make a lick of difference cause now we no longer have to just balance US production/consumption - we have to balance the global demand. again just a hypothetical, let’s not think through the legal headaches and the lawyers we would pay literal billions to think through force majure and shit. also, this is just applicable to crude oil. I’m a big fan of LNG personally. I think we flare too much ng and getting actual useful energy out of that in whatever form we can is a tremendous net positive. long oil IMO cause we’re never going to reinstate the export ban. I bought a ton of Magnolia O&G mid Covid cause I loved their senior leadership and I’m holding on forever. $1 bet that 5 years from now domestic crude production will be up another 25% but crude oil will still be $100+. But we’ll still be bitching about these domestic hurdles. Sent from my iPhone using Tapatalk
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question to the pro-oil guys here, say you get what you want - no activist ESG initiatives, ramp up of banks investing in production, streamlined permitting, Keystone and other pipelines, hell even US DOE backed funding for retrofitting of refiners to process our domestically produced light sweet crude. But the trade off is we reinstate the crude oil export ban that Obama did away with back in 2014 I think. And yes I know this doesn’t apply to nat gas. We are currently exporting around 4 million bbls/day of crude oil. Up from about 0.5 in 2014. We are currently exporting around 12 bcf/day of LNG. Up from about 0 in 2014. Nat gas via pipeline is around 8 bcf/day, up from about 6 in 2014. And we’re also producing more crude oil and nat gas today than we were in 2014, even though our internal consumption has remained relatively flat. Yet we’re paying $5/gal and $6/mmbtu we know for a fact that nat gas and crude oil are priced on the marginal cost to produce (i.e the cost to produce the last bbl/mmbtu needed to balance the market more or less sets the price of the first produces). cause here’s where I’m coming from - can’t have your cake and eat it too. We can’t be out here saying American independence, lower prices when we know all of the incremental production is headed towards international markets which frankly makes a ton of sense/is big oils right since we’re all capitalists. My belief is that even if we remove all those impediments and don’t reinstate the crude oil ban - the days of $3 gasoline/nat gas are firmly behind us without some black swan demand destruction (i.e. COVID) event. I’d argue that this is actually anti-American in a way since we’re still getting fucked by high gasoline prices since big oil makes better returns/better financing cause of a forward sold contract going international plus the additional pollution in our local environment so that a subsection of oil and gas producers and mineral right owners make off like bandits. So as long as the crude oil exports are still in the picture - I’m having a tough time believing that big oil will take pity on us Americans and our $5 gasoline/nat gas so they are better served blaming ESG and permitting (i.e. controlling the narrative/deflecting) Would love to here from the experts on where I’m wrong. Sent from my iPhone using Tapatalk
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Reunion? Sent from my iPhone using Tapatalk
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lol I think they revoke your passport in Taiwan if your BMI is over 20 so no. Sent from my iPhone using Tapatalk
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This forum is wild man. I also played Torrey last Monday and know exactly who you are talking about. hook ‘em
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