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936horn

By 936horn
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Pescado_Rojo
Pescado_Rojo

I bet you could score a Lafayette 10 for a mani/pedi gift card and a pound of boudin right now.  I was sitting in a Starbucks by the med center in Laffy once, and a brand new white Escalade, lift

Rimbo
Rimbo

If you're Trump right now, you're watching Fox News, eating a cheeseburger, and getting mad about the lyin' media and preparing your next tweet about how some lupus treatment should be given to your s

fattyflattie
fattyflattie

My time finally came last Friday AM. I have survived around a dozen, give or take 1-2, since ‘08.  I was consulting for a project set to go in ‘22, but with all the uncertainty, it sounds like they’ve

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52-80

52-80 19381

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My message to the companies running gas stations and setting prices at the pump is simple: this is a time of war and global peril. Bring down the price you are charging at the pump to reflect the cost you’re paying for the product. And do it now.

It's not Putin's fault anymore.  High prices is because the literal immigrant who actually owns the gas station in the corner is charging 3 cent/gal margins.

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16 hours ago, Okie State said:

It's hard to believe anyone could be that clueless as to how any of this works.

Are you talking about the post above yours or Biden?

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Storm the Field

Storm the Field 5367

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WTI 8% meltdown today on global recession talk. Back in double digits for the first time since May 10th. Producers, refiners and service companies all getting hammered today.

On the glass half full side, RBOB is down to $3.38 ($0.90 less than a month ago), which SHOULD make it easy to find sub $4 unleaded later this month. There are already a small handful of stations on the outskirts of Houston that are below $4 according to gasbuddy.

https://www.gasbuddy.com/gasprices/texas/houston

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52-80

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Feels more like profit-taking by CTAs/trading houses, and maybe a little bit of cascading liquidation, doesnt it?

While a recession is a general mood du jour, theres no let up in expected energy demand - travel rates still up, SPR still down, and no signs of increased from OPEC+

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30 minutes ago, 52-80 said:

Feels more like profit-taking by CTAs/trading houses, and maybe a little bit of cascading liquidation, doesnt it?

While a recession is a general mood du jour, theres no let up in expected energy demand - travel rates still up, SPR still down, and no signs of increased from OPEC+

Yep. Energy boom / crisis is going nowhere. 

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MonkeyDoughnut

MonkeyDoughnut 10812

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1 hour ago, 52-80 said:

i bought crude on the way down, avg'd to 100.40 entry, and trading price as of this moment is 99.70.  hopefully it keeps recovering.  got banged up hard going long on 10y treasury rates.

You should do well... this is definitely a dip... before it climbs again

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30 minutes ago, Storm the Field said:

Sell-off cancelled. WTI back above $104 and Natty is up 13.5% on the morning to $6.25.

Yep. Fucking know-nothings running around like scared bitches on Citi’s report, which is a) retarded and b) headline-heavy by design. A relief in this crunch is an opportunity to buy more and fill all your vehicles up.  Sell-offs are temporary. 

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31 minutes ago, MonkeyDoughnut said:

no kidding... China lockdown/slowdown and global recession really taking root

Buying. Opportunity. 

Also an opportunity to unwind my fucking hedges. 

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babysdaddy

babysdaddy 2731

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I'm long oil, both direct royalties and equities, and have been for a few years now.  And I know (for sure) we have a structural supply issue globally, regardless of Russian crude, but fuck.  I keep having nightmares of Twain's quote "It ain't what you don't know that gets you into trouble.  It's the things you know for sure that just ain't so."

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BLKNSTY

BLKNSTY 290

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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.

Fig1_European%20Refinery%20Capacity.png?

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.

Fig2_European%20and%20U.S.%20Petroleum%2

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.

Fig3_Change%20in%20Global%20%28ex-China%

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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23 hours ago, babysdaddy said:

I'm long oil, both direct royalties and equities, and have been for a few years now.  And I know (for sure) we have a structural supply issue globally, regardless of Russian crude, but fuck.  I keep having nightmares of Twain's quote "It ain't what you don't know that gets you into trouble.  It's the things you know for sure that just ain't so."

Smart dude. Another smart guy is Dr. Beeper, who says: “Grab your balls and stop being such a pussy.” 

Like you I’m long direct royalties. Made a $9 million purchase in October that we hit a home run on. Made another $7mm deal last week that we probably overpaid for. But, I’ve never been more convicted about the massive supply/demand fundamentals that will constantly put upward pressure on prices. 

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10 hours ago, Storm the Field said:

Well, that's certainly putting your marker down. What's the economy look like in that scenario? $8 gasoline, $1000K/month electric bills?

Doesn’t matter. I don’t think it’s sustainable but it’s happening. I’m more certain about natty and that’s more sustainable. 

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