Thanks for the article and the resolute consistency. Could you elaborate on why the physical premium is so muted given market participants must also see what's coming?
But what do the traders in asia have to gain by being patient; if they truly saw an opportunity for money to be made why wouldnt they take it? If anything Id expect US traders to be complacent since we produce more oil than anyone while asia is very dependent on flows from the strait.
We all agree the oil shortage is pure math/molecules, but maybe there is an input we’re not seeing or acknowledging; China is now importing very little non-sanctioned oil since they have
1) an inside track to progress and expected duration of the conflict due to their relationship with Iran
2) the largest oil reserves on the planet by far combined with low levels of oil intensity due to coal and renewable generation
3) As a export centered economy they would suffer the MOST if genuine demand destruction took place; they DONT want oil to go parabolic!
All of the above make them feel more secure in drawing down their reserves. Is my logic crazy? Not a rhetorical question Lol
If the US does not (cannot?) refine its oil exports, why would it ban exports other than product exports? Already seeing a producer hedge against a large wti brent spread.
Thanks for the article and the resolute consistency. Could you elaborate on why the physical premium is so muted given market participants must also see what's coming?
To answer my own question it's been said US SPR barrels are making their way to the North sea keeping a lid on physical there.
Asian traders have also been very patient... to the point of complacency. They are hoping for a swift resolution.
But what do the traders in asia have to gain by being patient; if they truly saw an opportunity for money to be made why wouldnt they take it? If anything Id expect US traders to be complacent since we produce more oil than anyone while asia is very dependent on flows from the strait.
We all agree the oil shortage is pure math/molecules, but maybe there is an input we’re not seeing or acknowledging; China is now importing very little non-sanctioned oil since they have
1) an inside track to progress and expected duration of the conflict due to their relationship with Iran
2) the largest oil reserves on the planet by far combined with low levels of oil intensity due to coal and renewable generation
3) As a export centered economy they would suffer the MOST if genuine demand destruction took place; they DONT want oil to go parabolic!
All of the above make them feel more secure in drawing down their reserves. Is my logic crazy? Not a rhetorical question Lol
I appreciate this comment a lot. I think you are thinking about it correctly.
There are 160-170 million bbls in floating storage in the Persian Gulf. If the Strait opens today, they can get that supply in 2-3 weeks.
That's what they are banking on for the July physical cycle.
🙏
Thanks for the hand holding session. A little group therapy goes a long way.
"China is releasing crude oil inventories in underground storage,
knowing full well that the rest of the world is watching its onshore inventories."
China has five underground SPR storage facilities:
Huangdao (18.9 Mmb),
Jinzhou (18.9 Mmb),
Huizhou (31.4 Mmb),
Zhanjiang (32 Mmb),
Jintan (15.7 Mmb)
— totalling roughly 117 million barrels of capacity.
These stocks cannot be released without a government release order, which cannot be done secretly.
China's total underground crude oil inventories are less than 10% of their above ground storage which is estimated to be 1,100–1,300 Mmb.
How can you assume "the rest of the world" is *not* tracking these facilities? See Kper data:
https://help.kpler.com/en/articles/11484523-02-june-2025-crude-inventories-update-china-underground-spr-methodology-data-integration-overview
First of all, China said in April that they will release 30 million bbls.
Second, China has released crude from SPR without telegraphing the world. You are naive to think otherwise.
Third, there’s no realistic way to track underground storage.
"even during the Great Financial Crisis of 2008-2009, global oil demand fell only ~3%."
* How much oil inventories did China have then compared to today?
* How much of China's oil demand has decreased since then due to electrification of road
transport?
1/3 of the storage level today
China’s oil demand has grown 9 million b/d since then.
If the US does not (cannot?) refine its oil exports, why would it ban exports other than product exports? Already seeing a producer hedge against a large wti brent spread.
Product export ban is more likely than crude.