217 - Russian price cap not working | Dr. Dean Foreman with the API

Energy Week

Russian oil trade remains in ship-shape as the EU price cap has failed to stem Moscow's freight and insurance income, analyst sayshttps://markets.businessinsider.com/news/commodities/russian-oil-india-china-not-cheap-shipping-fees-kpler-analyst-2023-1

- "Debunking number one, no one really knows the price of Russian oil"

- Urals blend may be priced at $38/barrel (less than half price of Brent) but now Russia is selling all these other services to go along with it like insurance, shipping, etc. so they could be making $60+/barrel with all the other services rolled in.

Yellen says setting price caps on Russian refined oil products 'complicated'https://www.reuters.com/business/energy/yellen-says-setting-price-caps-russian-refined-oil-products-complicated-2023-01-21/- "Western countries are working to structure price caps on Russian refined petroleum products to ensure continued flow of Russian diesel, but the markets are complicated and there is a chance things do not go to plan" - Multiple different products make it harder to implement a price cap, apparently- European Union diesel ban comes into effect Feb 5- Yellen thinks crude oil price cap is successful so far because price for Russian crude oil dropped and Russia says its revenue is down -- but is it really?- There are so many ways to get around the price cap.U.S. energy head warns Republicans oil bill would lift pump prices

https://www.reuters.com/world/us/us-energy-chief-warns-republicans-that-oil-bill-would-raise-pump-prices-2023-01-18/

- Is this bill even a threat? This is posturing. Biden will just veto the bill and Republicans don't have veto-proof majority to override it.

- Doesn't make sense to put SPR releases under purview of Congress. Congress would be a terrible body to have approval authority over SPR releases.

- President should have authority to make these decisions

White House Aims to Reflect the Environment in Economic Data

https://www.nytimes.com/2023/01/20/business/economy/economic-statistics-climate-nature.html

- Idea put forth at the WEF by John Kerry, so it's unlikely to go anywhere

Dr. Dean Foreman from API: Monthly Statistical Report AND Quarterly Industry Report

- US consumed 25 million bpd of petroleum

- Part going into materials and petrochemicals was up

- EIA growth estimate up to 1 million bpd but IEA now estimating 1.9 million bpd of demand growth: different expectations for China's growth. Europeans anticipating shortage of natural gas and expectation they will replace this with diesel

- EIA estimates growth from US primarily. But API says growth flatlining. No tailwind coming from DUCs. How will we get 1million bpd growth? ANd where is growth from other non-OPEC countries? Less clear when this oil will come online.

- Less international drilling, more investment but costs are up. Despite weaker economic forecasts, oil demand is still strong

- API data focused on why production has been held back. Comparison with natural gas. Nat gas production is at all time high, exceeding pre-pandemic levels. Why? Gas has been led by Louisnana and Texas, which are conducive to gas drilling. Oil has more headwinds. Colorado stifling, New Mexico, Wyoming, North Dakota - drilling is all weak compared to pre-pandemic. Federal moratorium is a big issue for NM, WY, ND. Inability to build intrastate pipelines is hitting oil production.

- Appalachia should be the largest source of natgas in US but can't get Mountain Valley pipeline online even though it's mostly built! Finishing the pipeline would totally.

- Marcellus area natgas is prices nearly a dollar less than Henry Hub for next year. Why? This is big discount and is impacting the economics of natgas development.

- DUC issue is indicative of workforce limitations. limited completion crews so people making decision to keep completion crews on rigs that are operating because they might lose it?

- DUCs are theoretically the cheapest way to get product to market. News from Permian - changing how they are drilling, reshuffling. Is it economic?

- Distillate stocks increased for 3rd straight month. Are we in the clear? Concerns aren't totally alleviated but we are 33 days of supply as a nation (was 25 in October). Real question is how to get distillate to Northeast. Relatively warm winter has helped because more time to get diesel by rain and truck from midwest to northeast. Especially since imports from Europe are down.

- US net exports (crude oil and refined products) record for December

- EIA projections for exports think that US will have surplus in Q1 2023 despite huge exports every month in 2022. How does this work?

- Fundamentally, the market is tight. US products are in demand, let's make sure we are supporting US production in ways that are consistent with the promises we've made to our allies.

https://www.api.org/

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