Iran Crude Oil Exports -- July 8, 2018; Apple -- It's All About Seamless Connectivity And Its Ecosystem

Over the next few months there will be lots of stories about Iran, crude oil production, crude oil exports, and sanctions.

Most articles, based on anecdotal historical experience, will talk about Iranian production. To some extent that's important, but more important is Iranian crude oil exports.

First, production: this is a great example of how one can "lie" with statistics. In this case there is no lying, but the graphic is quite, well, should we say "graphic":

It certainly looks like Iranian production has dropped off significantly. But look at the x-axis. The range is 3.8 million bopd to 3.92 million bopd -- not much of a range. In round numbers, Iran is producing about 4 million bopd.

Now, exports.

Quick! How have Iranian exports been doing?

Answer: Iranian exports have been setting records. Who would have guessed. From the St Louis Fed:

So, in round numbers, Iran exports about 2.5 million bopd. Most of it goes to India, I believe.

So, Iranian crude oil production:

• 4 million bopd

Iranian crude oil exports:

• 2.5 million bopd

Sanctions:

• a cut in exports, anywhere from:
• 500,000 bopd
• to:
• 2 million bopd

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The Apple Page

If this is accurate, this is a big, big deal. An anonymous source -- the best kind in these situations -- LOL -- is reporting that Apple Music has now surpassed Spotify's subscriber count in the US. Wow. 

• The ticker symbol for Spotify Technology is SPOT; it was last trading for about $176, Friday, July 6, 2018.
• The ticker symbol for that other company is AAPL; it was trading for about $188, Friday, July 6, 2018.

From the linked article:

.... the report says both Apple Music and Spotify have more than 20 million subscribers in the U.S., with Apple now "a hair ahead" with "20 million plus" members.

In February, The Wall Street Journal reported that Apple was gaining U.S. subscribers at a higher rate than Spotify. Apple’s US-based subscriber growth rate was believed to be 5 percent in the U.S., compared to Spotify’s 2 percent.

Based on those figures, the report predicted Apple Music would surpass its biggest rival in the summer. [Can't wait for 4Q18 earnings call.]

Apple's growth was said to be due in part by the increasing numbers of devices in consumers' hands. Since the WSJ report, Apple has also released its HomePod speaker, which includes features specific to Apple Music. 

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Pancake Break After Swimming

Well, That Was Easy: Iran's First VLCC Steaming Toward Asia One Day After Nuclear Deal "Signed" -- July 17, 2015

This is pretty cool; should make Valerie Jarrett happy. Platts is reporting:

The first VLCC to leave Iran's floating storage flotilla since a nuclear deal was reached with world powers earlier this week in Vienna is currently sailing in South Asia, Platts vessel tracking tool cFlow showed Friday.

The National Iranian Tanker Company's Starla, which had been anchored at Kharg Island in the Persian Gulf for 216 days, is the first ship to leave Iran's floating storage fleet since the landmark deal Tuesday.

The Starla, which has a capacity of 2.1 million barrels, is currently voyaging off the coast of Pakistan and destined for Singapore.

Wiki has a very nice graphic showing the various sizes and classes of ocean-going oil tankers. The graphic does not include the New Panamax which will become operational in 2016 or 2017 with the widening of the Panama Canal. New Panamax will include ships up to 120,000 DWT. This would put the New Panamax at the lowest end of the Suezmax and still won't accommodate VLCC (200,000 to 320,000 DWT) or the ULCC (320,000 to 550,000 DWT), at least as described in those two linked articles.

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Not Easy

Looks like Tiger Woods could miss another cut, this time in Scotland, at the British Open. Currently tied at about 131st place, and dropped another stroke in the early going today.

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Hold Onto Your Texas Hats

Texas Monthly's cover story this month: "The Secrets Behind Your Favorite Texas Songs."

An amazing, amazing list. The writers chose the "top" 25 Texas songs, and although the introduction does not say they were put in any particular order, they are numbered one to 25, suggesting that there was some sort of ordering going on.

I had not heard of song #1 so I was a bit confused / concerned. But then I knew the list was credible / authentic:

#8: Pretty Paper, Willie Nelson
#11: Wasted Days and Wasted Nights, Freddy Fender
#12: Redneck Mother, Jerry Jeff Walker, recorded; written by Ray Wylie Hubbard
#15: New San Antonio Rose, Bob Wills
#23: L.A. Freeway, Jerry Jeff Walker, recorded; written by Guy Clark
#24: Last Kiss, J Frank Wilson and the Cavaliers, recorded; written by Wayne Cochran
#25: London Homesick Blues, Garry P Nunn with Jerry Jeff Walker, records; written by Garry P. Nunn

You know the list was legitimate when it includes a song by the Dixie Chicks (Travelin' Soldier) and the pop song by J Frank Wilson (Last Kiss) and only song by Willie Nelson. But the killer song is #1, Tighten Up, Archie Bell and the Drells.

Remember, this is a Texas list, not a Rolling Stones list. After watching #1 on YouTube, I was blown away by the number of songs Jerry Jeff Walker on this list of 25: no less than 3. There will be lot of letters to the editor:

• only one Willie Nelson song? You gotta be kidding
• Willie Nelson had as many songs on the list as the Dixie Chicks? I'm canceling my subscription
• no songs by Waylon Jennings: WTF?

But any list that includes Freddy Fender's Wasted Dasy and Wasted Nights is hard to ignore.

Where Will The "New" Iranian Oil Go -- July 14, 2015

My hunch is that with regard to Iranian oil, not much is going to change very soon (except emotions) with regard to Iranian exports.

First of all, the deal has to be finalized, reviewed, and then acted upon. Second, Iran had waivers to sell a lot of its oil, and no doubt, skirted the sanctions and may have sold much more oil that we know, albeit with a bit of difficulty. Third, even if everything is worked out and everything is deemed to be hunky-dory, it will take some time to get Iran back up to full capacity.

Finally, there will be a lot of competition.

Who are the buyers of Iranian oil? Platts:

Iran sells most of its crude exports to four Asian countries: China, India, Japan and South Korea. With Turkey and Taiwan, these countries were buying Iranian oil under waivers from US financial sanctions granted in return for reduced oil purchases from Iran.

The deal struck July 14 would allow them to boost their purchases. That would mean the crude they’d been buying, from West Africa, Russia, the Caspian, the North Sea and Iraq, among others, could be looking for a new home.

Oil minister Bijan Zanganeh has said Asia will be Iran’s main target. That’s where oil demand is still growing, albeit more slowly than before. Europe, which took about 600,000 b/d before the sanctions hit, will also be a focus.

However, wherever Iran tries to sell its oil there will be challenges. Competition has increased everywhere, partly because lower US reliance on imported crude has sent former suppliers looking for new markets.

So, the losers are: West Africa (not unexpected); Russia (bad news); the Caspian; the North Sea (the latter two I know little about current status/production; and, Iraq (really bad news). It is interesting that Saudi Arabia was not mentioned as one of the losers.

Opening the Strategic Petroleum Reserve in Anticipation of the Iranian Embargo -- July, 2012

Updates

June 18, 2012: EU update on the embargo -- still going through with it. 

May 19, 2012: I guess the article below wasn't explicit enough, so the mainstream media had to spell it out: the president is setting the stage to tap the SPR.

Original Post

Link here. 

Speculation has grown that Obama will use an energy session at the G8 to seek support to tap emergency oil reserves before a European Union embargo of Iranian crude takes effect in July.

But with oil prices already sliding, a move by Obama to tap the Strategic Petroleum Reserve - alone or along with other countries - could expose him to criticism that the emergency supply should only be touched in a supply crisis.

And another of the PFIIGS (pronounced "figs")  is in trouble: Ireland may need a second bailout.

SeekingAlpha on $5 Gasoline

Link here to SeekingAlpha.com. It is a very long article. But here are a couple of nuggets (nothing new in my book).

First, consumption and production:

The world we inhabit today is a much different world than the one that existed 10-12 years ago. China has now become the world's second largest economy after the U.S. According to a recent IEA report we are facing a problematic global economic backdrop leading to a two-speed economic outlook-robust demand in non-OECD countries and falling demand in OECD nations. The result is that oil demand is expected to contract by 400,000 bd in the western world and increase by 1.2 mbd in the non-western world. The result is that oil demand continues to grow. After falling for two consecutive years, global oil consumption grew by 2.7 mbd in 2010. OECD consumption grew by 0.9% or 480,000 bd, a first since 2005. Non-OECD demand grew by a record 2.2 mbd, or 5.5%. Most of that demand growth occurred in China and the Middle East.

We have now surpassed the consumption levels reached in 2008. The IEA estimates that oil demand is forecasted to climb to 89.9 mbd in 2012, a gain of 0.8 mbd, an increase of 0.9% over last year. But where is all that increased oil going to come from? [Comment: well, for starters, the Bakken alone will be producing close to 0.6 million bopd by the end of the year]. In addition to worries over the loss of Iranian exports of 2.6 mbd, Libyan oil production is still down by 600,000 bpd from its peak before the civil war. Unrest in Yemen has knocked off roughly 250,000 bpd. South Sudan has stopped pumping 260,000 bpd day due to disputes over payments for use of its pipeline and export facilities. Civil unrest in Syria has led to a reduction of output by 200,000 bpd and Nigerian output has fallen by 20,000 bpd.

In round numbers that's over 1 million bopd currently not being supplied; but you know, there's always unrest somewhere, problems somewhere. I assume on any given day over the past twenty years one can find excuses for "lost" oil -- remember the burning Kuwaiti oil fields under George I; and I don't think Iraq was exporting a lot of oil under George II's era of "shock and awe."

But I digress.

What about the 2.6 million bopd that comes off the market if the Obama-Iran embargo goes into effect? Something tells me, this will all be worked out -- at worse, with "smoke and mirrors" behind the scenes; there's no way the Obama administration can manage a global loss of 2.6 million bopd effective July 1. It ain't gonna happen. If that much oil is taken out of production, it will be interesting to hear Bill O'Reilly, et al, talk about "speculators" again. It won't be speculation; it will be reality.

The linked article confirms my suspicions about Saudi Arabia's ability to respond with spare capacity, and so the same with the US Strategic Petroleum Reserve. Saudi is hard-pressed to make up that difference. Especially if pipelines are blown up or if oil-loading terminals are closed due to blowing sand.

With regard to refining:

The refining business has become unprofitable. Thirty-one (31) uneconomic refineries have been shut down in recent years, with two dozen more on the chopping block. Refiners earn an average profit of $11 for every barrel they process. That equates to $0.26 a gallon, about the average profit over the past decade. By comparison state and federal taxes average $0.39 per gallon. Now who is being greedy, the oil companies that do the work of refining oil or the governments that collect a tax?

Bottom line:

One can always find examples of disruptions in oil supply, so I don't get too excited about the "lost" one million bbls noted above from Libya, South Sudan, Yemen. The author didn't mention a similar amount in new oil coming from the likes of Utica, Bakken, Permian, and Eagle Ford. So, that's a wash.

On July 2, 2012, there may be folks arguing that the embargo has taken effect and/or is effective, and there may be folks arguing that the embargo hasn't happened and/or isn't effective, but I honestly don't think come July 1, 2012, I'm going to wake up and read that 2.6 million barrels of Iranian oil is suddenly off the market.

CNBC Talking Head: Iranian Embargo Does Not Go Into Effect for a Couple of Months

Operation Incredibly Loud and Extremely Close

Updates

May 3, 2012: so where do "we"stand with regard to India and Iran? India says it will cut  back on Iranian oil imports by 15% this financial year. Whoop-de-do. Iran is now exporting at the lowest level since 1990, following the Iran-Iraq war, down 150,000 bbls (in two months) to 3.2 million bbls/day. (At same link.) Is it just me, or does 150,000 bopd out of 3.3 million not seem like such a big deal with Brent oil priced where it is?

May 3, 2012: So much for global sanctions on Iran. India continues to flip-flop. First said it would ignore sanctions; then said it would abide by them; now insuring the Iranian tankers when others won't.

The Indian government has offered to insure as much as $50 million for any "Indian flag carriers" traveling to Iran. This amount falls well short of the actual liability incurred by oil tankers on any given trip, but it comes to more than six times as much as the Japanese government has offered its companies, illustrating India's interest in continuing the flow of Iranian oil.

April 17, 2012: does anyone really think Iran is selling less oil? At PennEnergy:

In the wake of the recent failed missile test in North Korea, cracks are also forming in U.S. and European efforts to contain access to nuclear technology on the other side of the continent.

Reuters reports that Iranian oil tankers have been circumventing sanctions against the country by operating without the normal electronic tracking and identification equipment, allowing them to transport oil to clients secretly.

Of the 39 oil ships that make up Iran's tanker fleet, only nine are currently operating with their black boxes active, allowing the AIS Live tracking system to monitor them.

One hour later after original post: a reader (Don) wrote to tell me that the embargo goes into effect July 1, 2012. I responded:

Three confounding factors July 1:

1) it's always possible, compromises will be worked out that will allow Iran to sell its oil on the open market

2) buyers will have found alternate sources and will have adapted to 3.5 million bbl/day shortfall

3) peak driving season, making it difficult to adapt to the 3.5 million bbl deficit

Oh, yes, one other factor:

4) Operation Incredibly Loud and Extremely Close --- this would be the Israeli attack on Iran. 

Original Post

I missed it, but I think he said the Iranian oil embargo will go into effect in June, 2012.