Oil Bandit 🛢️

@ADaitche Of course there is, but can't say how much has been "destroyed" just from this hormuz episode. Only Petchem is palpable.

@OilCfd @CRUDEOIL231 Are you saying there is no meaningful demand destruction in China or the opposite? Sorry, can't tell 😅

I’ve been grinding away trying to map out China’s recent crude plays, but after going through today's report, I have to hand it to OIES—they scripted the plumbing way better than me. Here is my quick breakdown after running through their print, alongside the Chinese refinery throughput chart to help connect the dots. - Three months into the Hormuz crunch, and Beijing is completely blindsiding the market with its crude playbook. A heavyweight that easily sucked in 11mb/d over the last five years just saw its import prints plunge to 9.3mb/d in April. Now, the forward data says May and June seaborne arrivals are about to crater straight into the gutter at 6.5mb/d. Instead of running its usual playbook of panic-dumping the SPR to backstop the market during a supply crisis, Beijing just completely cock-blocked refiners from touching the strategic vaults, only greenlighting commercial stock draws. To make it worse, refiners aren't even willing to bleed their own commercial inventories, while state traders are acting like total penny-pinchers—happily flipping premium WAF cargoes back into the market and hoarding dirt-cheap Russian barrels instead. This is a complete 180 from the 2021 power crunch, when Beijing panicked and ordered everyone to grab supply 'at any cost.' The heavyweights and policymakers in Beijing clearly think they can outmaneuver this supply shock and keep the economic damage locked down by playing a few smart, tactical micro-levers. China’s true red line for freezing out imports is hardwired to the scale of their run cuts. If they try to copy-paste their five-year average throughput of 14.1mb/d, the exact moment seaborne arrivals drop below 9.2mb/d, they’re trapped—they either have to open the strategic taps wide or start chasing expensive market barrels. Instead, chopping runs by 5% down to a 13.4mb/d baseline is hands-down their most realistic, long-term survival play. In this setup, if domestic crude extraction and pipeline taps keep humming, they can easily coast for a few months without taking a single economic hit, even with seaborne prints scraping a measly 7.9–8.5mb/d, because transportation fuels like gas and diesel will still be taken care of. However cranking run cuts to a nuclear 10% scenario means they could survive without chasing a single market barrel even if seaborne flows dry up to 7.2mb/d—but they'd have to throw petrochemical feedstocks like naphtha and LPG under the bus just to keep gas and diesel flowing, a desperate move that runs on borrowed time and stalls out after a few months unless the whole economy is in a total tailspin. To micromanage this whole run-rate circus, China's refining complex is pulling a highly responsive lever: the yield shift. Beijing explicitly told state majors like Sinopec and PetroChina to ditch chemical feedstocks and prioritize flooding the market with gas and diesel, and these plants immediately saluted by shifting their product yields by several percentage points on a dime. As a result, the real bloodbath isn't happening at the refining gate—it's completely decimating the downstream petrochemical chain. With Hormuz blocked, their seaborne naphtha inflows were already sliced in half, but a 5% run cut is about to bleed domestic naphtha and LPG supplies by tens of millions of tons a quarter, sending a compounding, fatal shock straight through the petchem feedstock backbone. They are keeping wheels turning by guaranteeing gas and diesel, but the squeeze on industrial chemical feedstocks is completely running on borrowed time. To paper over the massive raw material hole in the petchem chain, Beijing is shoving its massive 'Coal-to-Chemicals' complex into the spotlight, branding it as a strategic shield against volatile crude under the 15th Five-Year Plan. Thanks to dirt-cheap, stable domestic coal, inland plants churning out olefins and methanol are running hot to boost volumes, but this quick fix hits a hard ceiling when it comes to replacing lost barrels at scale due to structural bottlenecks. The core infrastructure is trapped deep in the northwestern sticks like Inner Mongolia, meaning slamming those products down to the massive manufacturing teeth on the southeastern coast comes with a punishing logistics and freight premium. Most importantly, coal gasification routes physically cannot clone key aromatics or specialized LPG chemical chains—the feedstock deficit is mathematically locked in. On top of that, the fact that Beijing is sitting on a massive 1.1-1.3 billion barrel pile without tapping it proves that institutional red tape is locking up the plumbing. The 100 million barrels buried deep in dark underground rock caverns—completely invisible to satellites—are almost entirely SPR, requiring endless red tape like complex auctions and market disclosures, so Beijing is hoarding it as a nuclear option. Even for the commercial barrels that are accessible, refiners are terrified to draw down because plotting out the repayment timeframe to replace that crude is a total mathematical nightmare in this chaotic macro environment. Beijing is pulling off a highly calculated micromanagement script here: they are completely freezing out the inventory draw requests from state-owned heavyweights like Sinopec, who are nakedly exposed to global benchmarks and were the first to aggressively slash throughput. Instead, they are using the Shandong teapots as a human shield—handing these independent refiners tax breaks and strict run-rate mandates because they have the flexibility to stomach toxic, illicit Iranian and Russian barrels to cushion the margin bleed. Bottom line, this entire web of macro levers—starving imports, shifting yields, hunting for distressed barrels, and burning through coal-to-chem assets—will keep the lights on and protect the economic skeleton through the peak of summer, but only under that tight 5% run cut baseline that keeps seaborne arrivals pinned at roughly 8mb/d. But with May and June seaborne prints already locked in at a subterranean 6.5mb/d, the expiration date on this makeshift band-aid play cannot stretch into autumn. Short of letting their entire national refining infrastructure suffer a catastrophic meltdown, Beijing is running straight into a hard physical wall. Before late summer wraps up, they will be forced to either open the strategic floodgates and dump their massive stockpiles or make a frantic U-turn right back into the international physical market, chasing heavy volumes aggressively at any price. #oott #iran

@CRUDEOIL231 it's demand man...domestic jet prices are in line with international prices and demand kept up... now road fuels demand dropping 10% in just weeks? I don't buy it.. chinese gasoil and gasoline has been shit all along

@OilCfd Demand or inv? That's the real kicker right there. I think most ppl realize by now that the demand baseline has been overinflated, but that alone doesn't solve the problem.

@Oriol_Mad @OOOO39711442 looks like same "shortcut". I'm watching those Frontline vessels.. those will be the last to move

@OOOO39711442 @OilCfd Nissos keros earlier in the morning

idk, but this Shell tanker just got out, through the "Omani highway"...allegedly...

@jsmllorente @reardensteel_ @oil_pulse @AdiSurreyEnergy Shell apparently doesn't have enough oil for their own refineries...which is unusual because they produce enough for themselves and leftovers for other refineries.

@reardensteel_ @oil_pulse @OilCfd @AdiSurreyEnergy I can only guess but they leave clues (keywords ) that with the help of gpt becomes readable. Those guys know a lot of physical oil …. And thank you all btw !!!

MED CRUDE: Gunvor Sells CPC at Pre-War Level Bloomberg Shell bought 132k tons of CPC from Gunvor for June 19-23 at Dated -$1.95/bbl, CFR Augusta Trade price was the lowest since Feb. 27 '

@oil_pulse @AdiSurreyEnergy yes, but they are bidding in the dated window as well, they are not offering their latam/waf equity cargoes either... their own refi system was doing ok, where are they short?

Shell often take CPC to their own system, this price is well below market levels traded in previous few days. Happens a lot with med market crudes, there is over supply basis med demand. at the moment CPC doesn’t really arb out to NWE or to Asia (well until today). This Platts level probably resets the market and now allows it to compete with arbs.

@The_RySci are more sweets coming out from SPR? That would explain Mars relative strength.

@OilCfd Think some of this diff move is a function of the Sweet SPR bbls hitting the gulf in June/July no? WTI spread might be the component the needs to do more work to keep bbls home

No more exports. US barrels stay at home

@plm203 We can't afford to lose a single barrel. Everything will go up in that case... there are not that many "long" positions as you may think

@OilCfd What if Bab al-Mandeb is closed somehow, and 4Mb of Arabian crude is lost ? Would not that make alot of long Brent positions be closed, thereby pushing Brent downward for a few weeks, time to rebalance ? and push USA to stretch exports a little further to support its empire ? Ty.

@SheDrills @utopia_escape Someone is paying up Midland north of Oklahoma. PADD1 &2 should be back running 95%. We could go back to the usual 3.5/3.8Mnbp of crude exports

@utopia_escape @OilCfd Exports will hold in my opinion. We are a “net exporter” can’t use it all.

@OlaFairchild china, Korea & Jpan are down 5Mnbpd combined... rest of the world (including India) is -150kbd give or take

@OilCfd How are these numbers vs 5 months ago?

Month-to-date Oil imports.

@JavierBlas I got an extra 5 in there..

@OilCfd Turkey number is a typo?

One of the reasons, not "the" reason

@ALikhodedov only oil importers... and watch those with sound fiscal discipline and trade surpluses, they can ride this for a little longer

100kbd from Indonesia yes. But you cannot cut 800kbd out of Indonesia - it just won't be possible. Also in poorer countries some demand also comes from people with relatively high amount of resources. So my point is - I think fairly straightforward. If oil exporters and/or wealthy countries is 81mbd of demand and poor ones are 24mbd, you cannot get to a 10-12mbd demand cut only through poor ones. Or even predominantly through poor ones.

DEMAND DESTRUCTION One idea I want to challenge is that if we go into a full demand destruction mode (when you cannot really draw the inventory anymore), the richer (Western) countries will be spared. Or that EM countries as more price sensitive will absorb most of the adjustment. I saw this in some mild shapes from a couple of smart and competent people - so wanted to dispute this view. My argument is simple: 1. If you take OECD countries (rich + a few middle income) + China (has reserves and resources) + Middle East (rich and oil exporters & also have a surplus of oil now due to Hormuz) + Russia + Brazil + Argentina (middle income net oil exporters) - this is just under 80% of global oil demand. I assume that oil exporters and China will not absorb above average share of demand destruction (maybe ex things like China shifting petchem demand to "coal to chemicals" plants), the rest of the pack are mostly in the high income category. 2. Production outage is 13mbd+ (all liquids) and once Iran curtailment will kick in we will go into 14mbd+ Pre-war surplus estimates for the summer (seasonally strongest period) were probably 1-2mbd on average. Ex-Gulf production growth (above pre-war estimates) will still be under 500kbd in Q3. This means in a full demand destruction mode we would need to destroy 10.5-12.5mbd of demand. 3. clearly the countries ex group 1, representing 24mbd of demand are not going to cut their consumption by 50% and absorb a 10-12mbd cut. It is just impossible. Besides even poor countries occasinally pay high prices too - as we know he highest landed crude price was paid by Sri Lanka ($286 per barrel as per HSBC CEO).... So rich importers would have to do their part - if we get there - it could be shortage or just demand reduction due to very high prices. Exporters will probably try to restrict export and isolate themselves from the problem. I sincerely hope that we do not see how it plays out.

@NebHuskies @ALikhodedov we are underestimating oil traders ability to also shape preference and policy... In just 1 month these guys reshuffled the entire thing. Also, I think is wrong to call it "destruction" yet...I'm in the "demand streamlining" camp

@OilCfd @ALikhodedov demand destruction has complex frequencies. while factors like consumer preference, policy can shape long-term shift, short-term destructions come from prices alone. at $100 we'are far from destroying 10mbpd ST demand, even using the most conservative oil elasticity coefficient.

@ALikhodedov Australia last month. They didn't destroy demand, they went out and paid stupid prices, because they can afford it... US paying $7/gal (like the rest of the world).. One can always cut out 100kbd from Indonesia, 50kbd from somewhere else and ship it to you, because you will pay.

@OilCfd my point is that if you take those who sell + rich countries - this is too big of a share of global demand. So they will end up absorbing part of demand destruction if we get there - there is no way around it.

@ALikhodedov there's 2 types of EMs, those who buy oil and those who sell, the later are doing fine. Developed countries wont pay from oil, will pay from sticky inflation and low growth..EMs on the other hand will catch up on transition faster

@ALikhodedov wait wait... you need to destroy 12.5Mbd if you want oil at $60... at a $100 with 5Mbd destruction we are kind of there. you mention something interesting, not demand destruction but 'demand shift". Coal, induction cookers in India, Chinese EV sales in emerging markets..