Traders Marshal Fleet of Supertankers to Haul USA Oil to Europe -- Bloomberg -- March 16, 2023

Direct to Rigzone / Bloomberg:

Europe is set to import a record amount of American crude this month, relying increasingly on larger tankers as sanctions on Russian oil upend global trade routes.

Ships hauling as much as 1.84 million barrels a day are set to arrive from the US Gulf in March, tanker-tracking data compiled by Bloomberg show. Meanwhile, smaller vessels are getting costly with more being booked to transport Russian oil for journeys to Asia.

The trade boom is another byproduct of Russia’s war in Ukraine — and sanctions that the west slapped on Moscow in reaction to it. The shift probably makes the fleet less efficient, thereby eroding the total supply of tankers, which transport roughly 40% of the world’s oil.

A total of 11 supertankers — known in the trade as Very Large Crude Carriers, or VLCCs — and 16 Suezmax-class vessels are set to arrive in Europe from the US Gulf this month. These big ships are now hauling about 60% of the crude on the route, compared with 37% a year ago. Supertankers can haul about 2 million barrels of oil, while Suezmaxes can carry about 1 million. 

Normally, even smaller ships known as Aframaxes — with a capacity of about 700,000 barrels — are used for the voyage. That’s partially because Europe has only a few ports that can handle supertankers, which are usually reserved for the longest journeys across the globe. 

However, Aframaxes are in short supply these days as traders book the vessels to haul an increasing amount of Russian oil to Asia. Big importers like China and India have been picking up larger volumes as western buyers abandoned the cargoes due to sanctions on Moscow for the invasion of Ukraine.

As a result of the shift, it’s now relatively cheap to hire the biggest ships to haul crude from the US Gulf to Rotterdam. For a supertanker, that cost is about $2.70 per barrel of oil, according to Viktor Katona, lead crude oil analyst at Kpler Ltd. For an Aframax on the same route, it’s about $8.50 per barrel.  

In addition, an increasing number of US-origin Suezmaxes are arriving in Europe partially full, as that’s still a cheaper option than booking an Aframax on a per-barrel basis. More and more American cargoes are also discharging at multiple European ports because there are different buyers.

US Oil Is Back -- Stronger Than Ever -- February 26, 2023

Link here.

ESG is dead.

Energy transition is dead.

But US oil sector is not. 

From the linked article:

A year of war in Ukraine has highlighted the return of oil as a source of U.S. financial influence and geopolitical power.

As the West has shunned most Russian energy, unleashing a pressure campaign against the Kremlin’s petroleum revenues, record U.S. crude exports have helped fill the gap in Europe with the oil needed to produce gasoline, diesel and jet fuel.

Since February 2022, when Russia invaded Ukraine, average monthly seaborne cargoes to the continent jumped 38% compared with the previous 12-month period, according to ship-tracking firm Kpler. A fleet of skyscraper-size tankers carried more crude to Germany, France and Italy—the European Union’s largest economies—as well as Spain, which alone boosted purchases by about 88% over the period.

The pull of oil shipments from the Gulf Coast to Europe, which Kpler pegged at 1.53 million barrels a day in January, has in recent months made the continent a larger destination for U.S. crude than Asia.

By the way, have others noted "Kpler"?

Now, fallout from the war in Ukraine is underlining how the shale boom remade U.S. energy leverage over the past 15 years. Innovations in hydraulic fracturing and horizontal drilling that tapped gushers of fossil fuels are reshaping energy trading and prices in the image of West Texas and other shale regions.

U.S. natural gas shipments to Europe more than doubled last year, according to the White House, cushioning the continent’s households and manufacturers after Russia throttled supplies. Analysts say surging U.S. crude production helped to calm markets as the West restricted most Russian exports with bans and novel price caps in recent months.

“America is back in the most predominant position it has been in world energy since the 1950s,” said Daniel Yergin, an energy historian and vice chairman of S&P Global. “U.S. energy now is becoming one of the foundations of European energy security.”

Much, much more at the link.

Remember: the most recent round of sanctions went into effect earlier this month, February 5, 2023.

And Russia has announced it's cutting production by 500,000 bopd starting in three days -- March, 2023.

Russian Economy -- Update -- February 25, 2023

Link here.

France 24.

Russia "War" Budget -- 2023 - 2025 -- Signed December 5, 2023

Trivia: Putin signed the "war" budget the day the December 5, 2022, sanctions went into effect. 

The Russian budget: https://www.osw.waw.pl/en/publikacje/analyses/2022-12-12/russias-war-budget-2023-2025. Archived. This is an incredibly bleak report / analysis. 

Russian National Wealth Fund -- Russia's sovereign wealth fund: wiki. 

Russia's sovereign wealth fund: wiki.

Previously reported:

Jan 18 (Reuters) - Russia's National Wealth Fund shrank to $148.4 billion as of Jan. 1, down $38.1 billion in a month, as the government took out cash to plug its budget deficit, data showed on Wednesday. The ministry said it had spent 2.41 trillion roubles ($35.1 billion) from the NWF, a rainy day fund that accumulates oil revenues, to cover the deficit in December. Along with heavy state borrowing at domestic debt auctions, the NWF - which was originally intended to support the pension system - has become the main source of financing for the budget deficit since Russia invaded Ukraine last year and was hit by waves of unprecedented Western sanctions.

It's All About Free Cash Flow -- February 8, 2023

Updates

Later, 1:43 p.m. PT: TTE -- link below.

TotalEnergies saw its net profit double in 2022 to a record $36.2 billion and announced an increase in dividends and share repurchases after the best annual results for the company and for Big Oil ever. 

The French supermajor reported on Wednesday, February 8, 2023, $36.2 billion in adjusted net income for 2022, double from a year earlier, thanks to higher oil and gas production, higher prices, a jump in LNG sales, and what it described as a “historic” performance in the downstream segment.

For the fourth quarter of 2022, TotalEnergies reported cash flow of $9.1 billion, and an adjusted net income of $7.6 billion, up by 11% from Q4 2021. For the full year 2022, the company generated $45.7 billion in cash flow. 

4 x 9.1 = $36.4 billion, so an "actual" $45.7 billion in cash flow is ... well, stupendous. 

Let's put that in come perspective (remember, we're in a recession and an unprecedented supply chain snafu):

Original Post

For those that missed it:

• start here;
• then, here;
• then, here, and parse that headline;
• then, note that WTI is still below $80 this morning, even after adding another 1% to its price from yesterday;
• then, note that Iran expects $100-oil when Chinese demand rebounds;
• then, most important(ly) for investors, literally no profit-taking yet this morning, or very little:
• XOM: just added two cents:
• CVX: down 1.23%
• DVN: down 0.6%
• EOG: up 1%:
• HES: down 0.3%
• PXD: flat

Weekly EIA petroleum report, link here:

• US crude oil in storage increased by 2.4 million bbls;
• US crude oil in storage now stands 4% above the five-year average and WTI still goes up
• refiners operating at 87.9% of capacity;
• distillates remain 15% below the five-year average;
• jet fuel supplied was .... up a whopping 6.6%.

****************************
Back to the Bakken

Active rigs: 46. Note comments in "Focus on Fracking" regarding rig counts and then consider:

• the number of active rigs in North Dakota; and,
• it's the middle of winter with some of the harshest weather ever;

Peter Zeihan newsletter.

WTI: $77.69.

Natural gas: $2.525.

Thursday, February 9, 2023: 23 for the month; 93 for the quarter, 93 for the year
39010, conf, CLR, Rhonda 7-28H,

Wednesday, February 8, 2023: 22 for the month; 92 for the quarter, 92 for the year
39020, conf, CLR, Rhonda 6-28H1,
38916, conf, Rampart Energy, Coteau 2,
38466, conf, Crescent Point, CPEUSC Riley Anne 8-36-156N-98W-TFH,
38465, conf, Crescent Point, CPEUSC Riley Anne 9-36-156N-98W-MBH,

RBN Energy: to survive DOE's hydrogen hub cutdown, certain factors may prove critical, part 2. Archived.

The U.S. is gearing up to provide billions of dollars in financial support for a series of regional clean hydrogen hubs and had what amounts to an informal cutdown at the end of December, announcing that 33 project proponents had been formally encouraged to submit a full application this spring. Although the Department of Energy (DOE) didn’t name any of the projects on the “encouraged” list, we’ve been able to identify many of the proposals — and add five more in today’s blog — even though a lot of project details remain under wraps. In today’s RBN blog, we’ll look at the new projects on our list and examine the major factors that are likely to influence a project’s viability.

A fifth project we can add to our list is the Heartland Hydrogen Hub, which is centered on a partnership between Bakken Energy and BNSF Railway, which could utilize clean hydrogen produced from natural gas across its rail network, which covers much of the U.S. west of Chicago. Planning began with a 2021 agreement between North Dakota-based clean hydrogen producer Bakken Energy and Mitsubishi Power Americas to develop a hydrogen hub in the state. North Dakota — along with its neighbors Minnesota, Montana and Wisconsin — agreed in October 2022 to work with Bakken Energy and BNSF on the hydrogen hub proposal. BNSF also signed a memorandum of understanding with Cummins Inc. and Schneider Carriers Inc. to work on incorporating the needs of long-haul trucking into the hub proposal.

A Geo-Political Note -- January 30, 2023

Folks in Congress who say we need to abandon Ukraine have no clue about geopolitics. This is as much about China-Taiwan as it is about Russia-Ukraine. 

These are the same folks who criticized the hasty withdrawal from Afghanistan. 

And, of course, there was Vietnam -- a war the US lost ...

Link here.

Link here.

And, this from Bloomberg today:

Sanctions On Russia About To Expand -- January 25, 2023

From Bloomberg today:

The European Union is about to ban imports of refined oil products from Russia. That could be much more disruptive than its earlier halt to crude purchases.

Starting February 5, 2023, imports of diesel, gasoline and other products used for further processing — including fuel oil and vacuum gasoil — cannot be imported from Russia into EU countries. The US and UK already have their own bans in place.

The sanctions will be accompanied by a ban on using European ships, insurance and other services to carry Russian oil products anywhere in the world unless they’re purchased at a price below yet to be determined caps. This mirrors the restrictions on crude shipments that were imposed December 5, 2022.

Overall crude flows from Russia haven’t been hurt by the EU ban, with seaborne shipments remaining around 3 million barrels a day for now. That will please the US Treasury, whose price cap was aimed at keeping oil flowing. Cargoes that previously went to Europe have been diverted to India and China, with shipments from Russia’s western ports sold at prices well below the $60-a-barrel cap.

But things could be very different for refined products trade.

Asia is thirsty for crude. India and China both import huge volumes for their massive refining systems. The two nations took about 14.5 million barrels a day in 2021, and that figure almost certainly increased last year. By contrast, they brought in just 3 million barrels a day of refined products from overseas.

But those huge systems mean that a ready market for Russian refined products outside Europe simply doesn’t exist in the way it did for crude. Many of the newly built plants were designed to maximize the production of diesel, the very fuel for which Russia needs new buyers.

Huge discounts will be needed to make it economic to move Russian-refined products to Asia while, ridiculous as it sounds, shipping similar products from Asian refineries back to Europe.

Without them, Russia may be forced to reduce processing rates and either boost crude sales or cut production levels — something it has managed to avoid so far.

--Julian Lee, Bloomberg Oil Strategist

Russian Sanctions -- January 19, 2023

Link here.

Miscellaneous Notes And Links -- January 19, 2023

Pepsi: this is why Warren Buffett "bets" on America. MAGA. Link here.

Best business models, according to Morgan Stanley. Link here. 

Only thirty-eight. At least eight were tech; Intel did not make the list. Only two energy companies made the list and it was an "oil" company. Only one car company? Ferrari. Only one American pharmaceutical company: Eli Lilly. Visa made the list; MasterCard, Discovery, did not.

• Names that caught my eye:
• Apple
• ASML
• Microsoft
• Samsung
• TSMC
  
• Eli Lilly
• Visa 

API vs EIA data: more and more, the API data is completely ignored. Folks wait for the EIA data. 

EV tricylcle: 

• ready to file for bankruptcy. $20,000 for an electronic tricycle. Arcimoto. Eugene, Oregon. Link here. And, here.
  

Cold: forecast for Europe suggests the weather changes next week. 

Russia:

• communism, 50 years, 1917 - 1967, set back Russia for decades;
• Ukraine: ditto. Link here. Direct to the source here.

Russian Crude Oil Exports Fall To Lowest Level Since January, 2021 -- December 23, 2022

D5S: tag.

Russian sanctions tracked here.

Link here.

D5S -- China Update -- December 15, 2022

Link here.

China could take up to 400,000 barrels per day of additional crude oil from Russia and possibly more.

However, it is likely to wait for physical crude markets to settle down ....

Beyond this initial caution, traders say quality issues, involving high mercury and vanadium content in Russian Urals crude, will likely impose some constraints on the extent and pace of any increase in China's imports.

China has been one of the main buyers to pick up Russian crude displaced from traditional markets in Europe, alongside India.

With the EU introducing a formal ban on imports of Russian crude from December 5, 2022, the appetite of these two countries to take more has become a key question for Russian production and global oil supply.

Assuming that uncertainties related to the price cap and associated bans wane and market players figure out how to trade safely within or around the cap, China could eventually buy an additional 200,000 b/d-400,000 b/d of Russian crude.

Another source at a major global market player said China could potentially increase Russian crude imports by significantly more.

Much more at the link.

D5S -- Remembering All The Pundits Who Said The Sanctions Wouldn't Work -- That China / India Would Buy All That Russian Oil -- December 14, 2022

Baseline data, prior to D5S.

Link here:

Lower oil prices and steeper discounts for Russian oil sent Russia’s oil revenues down in November despite the highest export volumes since April this year.

Last month, total oil exports out of Russia rose by 270,000 barrels per day (bpd) from October to 8.1 million bpd in November, pushed up by higher diesel exports

Russian diesel exports increased by 300,000 bpd to 1.1 million bpd in November, two months before the EU embargo on seaborne imports of Russian products.

Total Russian exports in November stood at their highest levels since April 2022, the IEA said. However, Russia’s oil export revenues fell by $700 million to $15.8 billion due to wider discounts on Russian crude and lower international crude oil prices. Russian oil prices saw steeper declines in November.

Urals in Northwest Europe fell by nearly $30 per barrel to $43 a barrel by early December, well below the $60 per barrel price cap finally agreed by G7, Australia, and the EU.

OPEC+ Oil Production; The Price Of Oil -- Rambling Notes On A Friday Night -- December 10, 2022

I'm posting this link:

• for the archives; some nice data points.

But other than that, I'm having a little trouble understanding the significance.

The headline seems confusing, but, then, the whole introductory paragraphs are confusing:

A new survey from Argus showed on Friday that OPEC+ production fell to 38.29 million bpd last month—1.81 million barrels per day short of its reduced quota.

The 19 OPEC+ members subject to the quota produced 310,000 bpd fewer barrels in November when compared to the month prior. But that’s still 1.81 million barrels per day short of its quota for November. November’s quota was a reduction of 2 million barrels per day off October levels, although it was understood at the time that the group might not be able to reach even that reduced target.

Trying to figure this out:

September 5, 2022, meeting:

• production quota to be reduced by 100,000 bopd in October, 2022
• mark the alliance's first reduction in output targets in 22 months and return quotas to August levels, when OPEC's 13 members aimed to pump 26.689 million b/d, while Russia and eight other partners committed to 15.414 million b/d, for a combined ceiling of 42.103 million b/d.
• in practice, however, with the bulk of OPEC+ countries already struggling to reach their quotas, not much supply will be lost.

October 5, 2022, meeting:

• a cut of a whopping two million bopd in November with no expiration date
• if in September, the combined ceiling was 42.103 million bopd, a cut of two million bopd in November, the ceiling would go to 40.1 million bopd (or thereabouts)

From today's article:

• OPEC+ production fell to 38.29 bpd in November
• that production = 1.81 million bopd short of what OPEC+ had allowed themselves to produce
• meaning the November combined ceiling must have been (38.29 +1.81) = 40.1 million bopd

The production numbers broken down:

• OPEC’s crude production was down 770,000 bpd for November, a six-month low. The production declines were led by Saudi Arabia, which saw its output reduced by 440,000 bpd.
• The biggest laggards among the broader OPEC+ group now, according to Argus, are Russia, producing 670,000 bpd under target; Nigeria, producing 530,000 bpd under target, Angola, producing 350,000 bpd under target, and Malaysia, producing 170,000 under target.

Despite all these cuts, the price of oil still plummeted this week. 

The December 5th meeting: no change. Waiting to see what the December 5th sanctions would do. 

****************************************
Why Is The Price Of Oil Plummeting?

Two reasons:

This chart:

And, what isn't being said: the Europeans have said enough is enough and have established a cap: $60 / bbl. And that cap will spread to Asia. 

In the 1980's we had an OPEC embargo. It looks like we have the reverse, a "price embargo." Asia is demanding a significant price cut from Russia for taking "the risk of buying sanctioned oil"; and, in fact, Russia's most important oil, Urals, is trading for $43 / bbl in Asia. 

This tells me the the current price for WTI at $70 / bbl is at significant risk for at least another $10-haircut, as they say.

D5S+2 -- December 7, 2022

From oilprice:

There's a heck of a lot of "stuff" packed into those two "headlines."

One can argue whether those two "headlines" are factual, accurate, likely to change, unlikely to change, but they certainly fit my "world myth" at the moment. I'm sure Peter Zeihan is watching closely, at least the Russian oil export story.

Two quick comments and then I'll bring up the links to the two articles. I haven't seen the articles yet.

First, I agree 1,000% that the downside to the oil markets is limited. Perhaps it plays out this way:

• short-term: a reset to $75 / $70 (Brent/WTI); and, then,
• mid-term: a return to prices oil bulls like

Second, if accurate that Russia's oil exports nosedive following a price cap,

• one can arguably say that nothing is going well for Mr Putin.

Drones attacking airbases deep inside Russia, southeast of Moscow are just the tip of his problems.

Earlier today Putin brought up the "nuclear card" again -- probably about the same time he was briefed that his crude oil exports were going "south" --  and I'm speaking metaphorically, not geographically or directionally.

Now the links.

Alex Kimani has been quite active the past few days; now again. 

Now, the second link.

Well, well, well. Alex Kimani again. Just after I mentioned that Alex has been quite active the past few days.

Russian crude-oil exports have taken a serious hit since new sanctions and a price cap came into force earlier in the week, with the Wall Street Journal reporting that figures from two data providers on Russian crude both show a big fall, though their magnitudes differ. 

According to one commodity-analytics firm Kpler, Russia’s seaborne exports fell by nearly 500,000 barrels per day on Tuesday, a 16% decline from the November average of 3.08 million bpd. 

Meanwhile, TankerTrackers.com, which tracks sea vessels using signals and satellite images, has reported that Russia's crude exports fell by nearly 50%. With shipments from the Black Sea and Baltic ports accounting for most of the fall.

Some will immediately say this is all temporary -- due to the Turks -- and within a day or two, the Russians and Turks will sort it out. 

So, we'll see. 

But, can you imagine what oil traders are going through right now? Absolute pandemonium, confusion, no clue what's going on. There are so many moving parts. This is probably not a good time to be short oil.

******************************
More

But Not Ready For Prime Time

I said this at the top (see above):

First, I agree 1,000% that the downside to the oil markets is limited. Perhaps it plays out this way:

• short-term: a reset to $75 / $70 (Brent/WTI); and, then,
• mid-term: a return to prices oil bulls like

If that's accurate:

• US oil companies will do just fine at $75 / $70;
• sure, their profits will take a hit, but they've been through much worse;
• in the big scheme of things, $75 / $70 is pretty good.

But long term, as soon as a year from now, it could be really, really good for US oil companies.

Think of it this way. A year ago, there were three actors on the global stage (in the theater of oil):

• the US
• OPEC
• Russia

Today, there are two:

• the US
• Saudi Arabia

A year from now, there will still be only two:

• the US
• Saudi Arabia
  

And if the global economy "explodes" in a good way -- a year from now --

• coming out of a pandemic;
• coming out of a global recession;
• the demand for oil might be more than just noteworthy.

But between "now" (tonight to be specific) and "then" (December 7, 2023) it could be quite the exploding Ferris wheel ride. But I think I read something on twitter today to the effect that, that is when fortunes are made.

US Crude Oil Exports Hit Record Just Before December 5th Sanctions -- December 6, 2022

December 6, 2022: US exports to Europe, just before sanctions went into effect, link here -- 

• last week, U.S. exports of crude oil and petroleum products hit 11.8 million barrels per day, marking an all-time high.
• the record came just days before the EU embargo on imports of Russian crude oil by sea came into effect.
• seaborne exports of U.S. crude oil exceeded 7.1 million bpd, which also marked an all-time high.
  

December 5, 2022, Sanctions -- Tracked Here

January 11, 2023: current estimates, EU sanctions could cost Russia $300 million / day. Charles Kennedy.

January 2, 2023: India, Russia and sanctions. 

December 23, 2022: Russian exports in November, 2022, fall to lowest level since January, 2021.

December 22, 2022: estimates of the Russian economy.

• NPR, BBC, others reporting that the sanctions aren't working;

December 15, 2022: China update. China waiting before taking more Russian crude oil.

December 14, 2022: update with baseline.

December 6, 2022: December 5th Sanctions (D5S) -- one day later:

December 6, 2022: US exports to Europe, just before sanctions went into effect, link here -- 

• last week, U.S. exports of crude oil and petroleum products hit 11.8 million barrels per day, marking an all-time high.
• the record came just days before the EU embargo on imports of Russian crude oil by sea came into effect.
• seaborne exports of U.S. crude oil exceeded 7.1 million bpd, which also marked an all-time high.
  

December 5, 2022:

• baseline numbers before the sanctions went into effect:

CNBC: August 20, 2022.

From the linked article, again, before the December 5th sanctions:

Imports of Russian oil, including supplies pumped via the East Siberia Pacific Ocean pipeline and seaborne shipments from Russia’s European and Far Eastern ports, totaled 7.15 million tonnes, up 7.6% from a year ago.

Still, Russian supplies in July, equivalent to about 1.68 million barrels per day (bpd), were below May’s record of close to 2 million bpd.

China is Russia’s largest oil buyer. Imports from second-ranking Saudi Arabia rebounded last month from June, which was the lowest in more than three years, to 6.56 million tonnes, or 1.54 million bpd, but still slightly below year-ago level.

How much oil does the EU still import from Russia, The Indian Express, September 21, 2022, before the December 5th sanctions:

Under the looming ban, the EU will need to replace an additional 1.4 million barrels of Russian crude.

What are the alternatives available?

Russian crude oil imports into the European Union and United Kingdom fell to 1.7 million barrels per day (bpd) in August from 2.6 million bpd in January, but the EU was still the biggest market for Russian crude.

The UK has already stopped importing Russian crude following Moscow’s invasion of Ukraine, and the EU will ban imports from December to strip the Kremlin of revenue to fund the war.

Imports from the United States have replaced about half the 800,000 barrels of lost Russian imports, with Norway providing around a third.

For India, link here. 

Russia has become India's top oil supplier in October, surpassing traditional sellers Saudi Arabia and Iraq.

Russia, which made up for just 0.2% of all oil imported by India in the year to March 31, 2022, supplied 9,35,556 barrels per day (bpd) of crude oil to India in October — the highest ever.

It now makes up for 22% of India's total crude imports, ahead of Iraq's 20.5% and Saudi Arabia's 16%.

India imported just 36,255 barrels per day of crude oil from Russia in December 2021 as compared to 1.05 million bpd from Iraq and 9,52,625 bpd from Saudi Arabia

There were no imports from Russia in the following two months but they resumed in March, soon after the Ukraine war broke out in late February.

India imported 68,600 bpd of Russian oil in March while it increased to 2,66,617 bpd in the following month and peaked to 9,42,694 bpd in June. But in June, Iraq was India's top supplier with 1.04 million bpd of oil. Russia in that month became India's second biggest supplier.

The Indian government has been vehemently defending its trade with Russia, saying it has to source oil from where it is cheapest.

"In FY22 [April 2021 to March 2022], the purchases of Russian oil was 0.2% [of all oil imported by India]. We still buy only a quarter of what Europe buys in one afternoon," Oil Minister Hardeep Singh Puri told CNN in Abu Dhabi last week. "We owe a moral duty to our consumers. We have a 1.34 billion population and we have to ensure that they are supplied with energy...whether it's petrol, diesel." What caught my eye(s) with regard to India:

We (the Indian) still buy only a quarter of what Europe buys in one afternoon.

This is a battle within OPEC+: Saudi Arabia, Iraq, and Russia. US unaffected.

Russia will be selling their oil at a heavy discount.

So, those are the baseline numbers. With the December 5, 2022, sanctions, note:

• the sanctions affect seaborne crude oil deliveries, not pipeline crude oil;
• in addition to the "global" December 5th sanctions, the EU imposed a $60/bbl cap on Russian crude oil.
• based on "talk," the $60-cap may be a bigger problem for Russia than the December 5th sanctions (tag: D5S).
  

There are two "arenas":

• political arena: I pay little attention to this arena:
• investors arena: I pay a lot of attention to this arena.

Political:

• do I care that there will be a lot of cheating by both sides, by both Russia and the EU? No.
• do I care that the "devil" is in the details? No.
• am I surprised that when US gasoline prices were spiking President Biden did not ban US crude oil exports? Yes.
• am I surprised that President Biden signed off on a huge off-shore export terminal south of Texas? Yes.
  

Investing:

• do I pay attention to the fact that US oil companies are replacing about half of the Russian oil the EU is not buying? Yes.
• am I surprised that when US gasoline prices were spiking President Biden did not ban US crude oil exports? Yes.
• am I surprised that President Biden signed off on a huge off-shore export terminal south of Texas? Yes.
• will some US oil companies do better than others in this environment? Yes.
  

With regard to cheating:

• some folks are watching Russia's tanker shipments and how Russia will get around the sanctions:
• some folks correctly note that India and China will make crude oil buying decisions based on best price;

Comments:

• folks forget that both India and China have finite on-shore oil storage facilities
• yes, both countries can store oil off-shore in those same tankers
• as "big" as the economies of India and China are, they can only grow so fast;
• China's GDP is actually falling
• China: Covid-19; Biden's IRA essentially cuts off China at the knees; when Apple leaves, "everyone" else also leaves;

The pie:

• global crude oil consumption will increase only marginally over the next few years;
• the size of the pie stays relatively the same size
  
• the portions of the pie? LOL.
• Russia loses most of Europe; all of the UK;  Russia's slice of the price gets significantly smaller;
• US, right now, is replacing one-half of what the EU is no longer getting from Russia (and this is before the December 5th sanctions
• the US slice of of the pie gets significantly bigger
• Saudi Arabia: could be the biggest loser
• Saudi Arabia: not set up logistically to supply EU
• Saudi Arabia: focused on China; Xi flying into Riyadh today (December 5, 2022) -- fact check;
• Saudi Arabia: can't afford to cede China to Russia
• tea leaves: expect to see a civil war within OPEC+ as Saudi takes on Russia (China); Iraq takes on Russia (India)
  
• even before the sanctions, Saudi's foreign exchange reserves dropped month-over-month
• Saudi's policy: "Saudi first"
• US policy: no more drilling
• no more drilling?
• less CAPEX
• short term: huge margins for the US oil companies;
• long term: US oil companies will do just fine

One last comment:

• this is crude oil;
• we haven't even discussed natural gas which might be an even bigger story than crude oil for the US

Okay, one last comment:

• will some US oil companies do better than others in this environment? Yes.
• the big five are better positioned to sell their oil to the EU than smaller US independents
• Canada has no export terminals; maybe TransMountain is the exception; not yet on-line

Disclaimer: this is not an investment site.  Do not make any investment, financial, job, career, travel, or relationship decisions based on what you read here or think you may have read here.

All my posts are done quickly: there will be content and typographical errors. If anything on any of my posts is important to you, go to the source. If/when I find typographical / content errors, I will correct them.   

WTI:

• December 2, 2022: about $78
• December 5, 2022: $81.06; hit $82 in early morning trading before dropping back
• December 5, 2022, 10:14 a.m. CT: WTI drops back to $79.88.
  

Note: while writing the above, it was reported that Russia will sell crude oil and oil products to Pakistan at a discount. Link to Charles Kennedy.

• the political story: Pakistan thumbs its nose at the EU and the US
• the financial story: from the linked article -

Many large customers in Asia haven’t joined the price cap mechanism, but China and India, for example – Russia’s top crude oil buyers now – are demanding steep discounts for the Russian grades.

Is this a win-win-win for everyone?

So, at least we have some baseline numbers. I will come back to this periodically with a more in-depth look eight months from now -- during the height of the US driving season.