arjun⚡️murti

Oil and gasoline relationship. (1) WTI and gasoline go together, with short-term leads and lags. (2) Retail gasoline is following WTI lower. (3) GC321 refining margins remain $27/bbl higher than pre-Crisis due to summer driving season and outages, or about $0.55/g. (4) Take $3.93-$0.55=$3.37/g, and you are very near the full drop in WTI. (5) "Big Oil" of course doesn't own retail gasoline stations in the U.S. (for the most part). It is mostly small, family-owned businesses and a few larger, publicly-traded companies. Small, family-owned businesses are not price gouging. (6) Investigations for "price gouging" has a long bi-partisan track record of failure.

Oil and gasoline relationship. (1) WTI and gasoline go together, with short-term leads and lags. (2) Retail gasoline is following WTI lower. (3) GC321 refining margins remain $27/bbl higher than pre-Crisis due to summer driving season and outages, or about $0.55/g. (4) Take $3.93-$0.55=$3.37/g, and you are very near the full drop in WTI. (5) "Big Oil" of course doesn't own retail gasoline stations in the U.S. (for the most part). It is mostly small, family-owned businesses and a few larger, publicly-traded companies. Small, family-owned businesses are not price gouging. (6) Investigations for "price gouging" has a long bi-partisan track record of failure.

Divestment was always idiotic as a policy. If you thought sector profitability was going to remain poor, then fine. In fact, profitability is now much improved and is on-track for a good decade ahead. We are not going back to 2020-23 insanity no matter who wins future elections. https://t.co/DzePAh7f8S

"THE OIL PRICE IS WRONG because it doesn't match my supply/demand modeling" seems to be a persistent view among oil specialists over the past year or so. Pre-Iran War the complaint was that oil prices were too high because everyone was modeling massive oversupply. Included in that view was that somehow China stockpiling didn't count as demand and Saudi/OPEC was flooding the market. Who knows whether Saudi-China anticipated SoH closure (probably not) but it sure felt at the time (as we wrote) that it was a purposeful decision to move below-ground inventory in Saudi to above-ground stocks in China--a great decision with hindsight for whatever the reasons were. Now here we are post SoH closure and many of the same oil glutters are discussing why oil is "only" $100/bbl +/-. Why did LNG spike so high in 2022? A rich region, Europe, was facing gas shortages post Russia cutoff and paid anything to outbid cargoes otherwise destined for Asia. Once that demand was satisfied, LNG prices understandably fell back. Why is oil not higher today? We don't have (and are unlikely to have) shortages in the U.S. Meanwhile Europeans, while concerned about jet and diesel, aren't yet facing shortages. Furthermore, developing Asia immediately went to COVID lockdown mode of work-from-home and cutting marginal travel. The oil price may well spike meaningfully if SoH stays closed! We remain deeply concerned with the current "messy peace" stalemate. We suspect it will be RICH world shortages that drive the big spike everyone thinks should already be here. Does back-end oil need to rally? I am not so sure. Maybe a bit, but not like what was needed over 2004-2014. The world isn't short known developable oil resource relative to expected demand growth in a 2.8% (pre War) trend global GDP world. That is a bid difference with China/BRICs oil super-cycle. The world is short (or tight) REFINING capacity and related MIDSTREAM infrastructure. Getting molecules to end markets is the issue at this time. Our core macro framework remains Geopolitical Super Vol. https://t.co/238l161nYH

It's a great graph from my friend @AkshatRathi.Remarkable stat that undoubtedly is driving economic growth in developing countries that now benefit from greater power availability they heretofore didn't have. My key takeaway: This is bullish for EM GDP growth, which in turn will prove to be one of the drivers of surprisingly bullish oil demand from those same areas. Solar, wind, batteries, nuclear, nat gas, geothermal, coal-driven power growth are all supportive technologies for our "obliterating peak oil demand" view. Low oil prices will similarly prove stimulative. Even the IEA has Africa oil demand growth in 2025 as second only to Asia. Africa's 1.4 billion people (eventually 2.4 bn) are as deserving of joining economic S-curves as are the people of Asia. 1/8 of us are rich. The other 7/8ths need massive amounts of all forms of energy.

I don't equate that rise of oil on the water as anything other than it is really noisy data and there is currently more oil on the water. There are major geopolitical issues right now, sanctions, OPEC unwind in flux, refinery seasonal downtimes. Bulls and bears both do this: find confirming data points. I've just never found oil on the water to be a metric that informs my oil price view. Which technically I don't have one now either since we don't publicly forecast oil prices. I could be an oil bear and still not find value in oil on the water.

I am a big fan of and often with Javier. But not on this one. Is my Bloomberg monitor broken? Are both Brent and WTI not backwardated 1-6? China and India inventories down slightly in 3Q...OECD inventories still generally low despite "cartoonish" oversupply. It's October. The crash should be happening now. Perhaps it will start tomorrow or next week or the week after? Calling oil markets in the short term is hard. Fortunately, I don't do that for a living any more. On my numbers, we are firmly in the bottoming phase after a 2-2.5 year mini downcycle. The max bullish $100+/bbl super-cycle calls from mid-2022 have been replaced with $50 oil glut cartoonish oversupply downsides. We are off ~$60/bbl from Russia-Ukraine highs. Why argue about the last $5 or $10 or $0? Demand is rising globally as failed "peak oil" demand calls get pushed to the right even as they should disappear altogether. Exploration is dead. Shale is maturing. The world needs massively more of all forms of energy, including crude oil. 1/8th of humanity is rich. Still 7/8ths to go. https://t.co/xKgfJ1kA2g

I am a big fan of and often with Javier. But not on this one. Is my Bloomberg monitor broken? Are both Brent and WTI not backwardated 1-6? China and India inventories down slightly in 3Q...OECD inventories still generally low despite "cartoonish" oversupply. It's October. The crash should be happening now. Perhaps it will start tomorrow or next week or the week after? Calling oil markets in the short term is hard. Fortunately, I don't do that for a living any more. On my numbers, we are firmly in the bottoming phase after a 2-2.5 year mini downcycle. The max bullish $100+/bbl super-cycle calls from mid-2022 have been replaced with $50 oil glut cartoonish oversupply downsides. We are off ~$60/bbl from Russia-Ukraine highs. Why argue about the last $5 or $10 or $0? Demand is rising globally as failed "peak oil" demand calls get pushed to the right even as they should disappear altogether. Exploration is dead. Shale is maturing. The world needs massively more of all forms of energy, including crude oil. 1/8th of humanity is rich. Still 7/8ths to go. https://t.co/xKgfJ1kA2g

I am a big fan of and often with Javier. But not on this one. Is my Bloomberg monitor broken? Are both Brent and WTI not backwardated 1-6? China and India inventories down slightly in 3Q...OECD inventories still generally low despite "cartoonish" oversupply. It's October. The crash should be happening now. Perhaps it will start tomorrow or next week or the week after? Calling oil markets in the short term is hard. Fortunately, I don't do that for a living any more. On my numbers, we are firmly in the bottoming phase after a 2-2.5 year mini downcycle. The max bullish $100+/bbl super-cycle calls from mid-2022 have been replaced with $50 oil glut cartoonish oversupply downsides. We are off ~$60/bbl from Russia-Ukraine highs. Why argue about the last $5 or $10 or $0? Demand is rising globally as failed "peak oil" demand calls get pushed to the right even as they should disappear altogether. Exploration is dead. Shale is maturing. The world needs massively more of all forms of energy, including crude oil. 1/8th of humanity is rich. Still 7/8ths to go. https://t.co/xKgfJ1kA2g

my interpretation of the referenced GS note: the process of calling and looking for the bottom is here. Except for periods when WTI falls to -$37, calling precise bottoms is tough. It's about the bottoming process and credit to GS for recognizing that even as they stick with a near-term bearish call. And for the record, I am a massive fan of Daan and his team.