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    Oil supply crisis defined by physical vs paper oil: Analyst



    Oil supply crisis defined by physical vs paper oil: Analyst

    Rory Johnston, Founder of Commodity Context, says the extreme backwardation in oil fuel contracts is due to the contracts not being anticipatory assets. He explains that it’s taken time for the effects of the oil shortage to show up in the data, and that the backwardation was intended to get ahead of that.

    18 Comments

    1. @AnthonyBrennan-n5q6r on

      This is war day 52. That means 20% of the world’s oil tankers have been at anchor in a warm water port. At day 60 the tankers will not be able to move efficiently without having their bottoms cleared. That’s two weeks in dry dock or burning up to 40% more fuel on a 40 day trip.

    2. @petrusromanus3790 on

      The broken petrodollar system did not help to produce oil during to rising oil prices. Profiteers like Warren Buffett has no intention to use money to drill oil after earn huge wealth from wealth instrument like options. Meanwhile oil companies did not make enough money to start new drill because they has sell lots of their oil cheaply to people like Warren Buffett at a lower price.

    4. @jlvandat69 on

      Fun fact: Approximately 2% of the population know what the word "backwardation" means. Basically, you must be a commodities nerd to use the obscure nomenclature.

    5. @akka2011hk on

      Can U use paper oil contracts to fill up your car? Don is exhausting whatever little credibilty he had left! Soon everybody will be listening to Iran and treat his truth media posts as satire materials! LMAO!!!

    7. @GeoffMiell on

      The real petroleum fuel crisis hasn’t started yet. If the Strait of Hormuz remains closed for much longer, things will likely get really bad, really fast. The world will soon be forced to make do with substantially far less crude oil & petroleum fuels.

      The Strait of Hormuz is closed (again). Since the Strait of Hormuz has been closed, 11 to 15 Mb/d (depending on various reports) of crude oil + condensate supply has evaporated from international markets. Pre-conflict, the world produced about 86 Mb/d of crude oil + lease condensate, of which only about 40 Mb/d was traded on international markets, while the remainder was consumed domestically by producer countries.

      Global fuel consumption continues, but afloat and onshore petroleum storages are being depleted at a rate of at least 8 Mb/d, perhaps more. Some estimates for global observable oil inventories (afloat & onshore) are now below 4,700 Mb. Global crude oil inventories haven't been below about 4,400 Mb (in 2018).

      Either we reduce our fuel consumption voluntarily now, or be forced to in a matter of weeks.

      The other aspect that appears not to be gaining attention is that shutting in oil wells risks oil reservoir damage that might be difficult or even impossible to fix.

      The longer crude oil and gas wells in Iraq, Kuwait, UAE, Qatar and Saudi Arabia are 'shut-in' the risks increase that they may NEVER RECOVER to pre-conflict production rates.

      Are we now in a permanent global post-peak oil supply paradigm? We'll see in the fulness of time…

    9. @LQVendorFP on

      The acute crisis is in the increased number of tankers required to fill a much longer transport pipeline. Once the tanker pipeline around the cape of good hope is filled, real time oil is readily available daily but the increase in working capital tied up in greater in transit oil and greater fuel and maintenance will bleed through to oil prices in the longer term. Insurance premiums through the strait make this alt route not unreasonable. It is not clear however if there are enough tankers to fill this longer pipeline. There is the rub….

    10. @Jasonswood-ch2bb on

      The headlines are confusing and that’s exactly the point. One moment, the Strait of Hormuz is declared open oil crashes and markets rally. The next moment, reports say it’s closed again, ships are being turned back, and tensions are rising. This is pure volatility and the market is reacting exactly how it always does. Most people approach moments like this emotionally: They wait, they panic, they hope things calm down. But volatility doesn’t need to calm down for you to benefit. Instead of relying purely on direction and prediction, there’s a growing shift toward market-neutrality strategies lik 'Midavest' that focus on volatility capture and spreads. Rather than waiting for a perfect entry, it focuses on capturing created by daily market movement and targets 15-20% returns. Regardless of whether the broader market goes up or down. I'm still green 51% in my portf0lio so I'll be fine. Always do your due diligence

    18. @sparkyfromel on

      the quoted prices are very misleading , WTI is quoted from Cushing Oklahoma , there is no shortage there whatsoever ,
      Brent is quoted from London with easy transport from the US and some from Norway and the admittedly increasingly irrelevant North sea , but no real shortage
      both grade are for light sweet crude ,both are from the North Atlantic bassin …. there is problems but no drama there .

      meanwhile the supply of heavier crude used for distillating diesel aviation fuel and the heavy stuff like heating oil and ship fuel is way more precarious
      in the Indian Pacific zone , it's a catastrophe , growing everyday

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