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The Impact of the US SPR Releases

Sept. 30, 2022

The length in the US balance over the last four months and the upcoming two months is primarily driven by the 1.0 mil b/d inventory draws from the US SPR, and secondarily by 0.6 mil b/d of US crude output gains.  Initially, SPR draws were overweighted to Mars (medium/sour), a highly demanded crude in the US refining system.  Beginning in August, the draws are more biased towards light/sweet crude.  With the US refining system likely at max intake of light/sweet, the impact is a widening WTI/Brent spread and significant arbitrage opportunities for ...

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LATAM Tanker Demand Update

Sept. 23, 2022

The short-term outlook for the Caribbean region begins to reveal the impact of increasing crude production from Guyana.  Latest data shows supply reaching 2.821 million b/d in the region for 2022, a 249,000 b/d jump y-o-y.  With crude oil demand remaining flat (no additional refining capacity) crude balance is expected to lengthen by 233,000 b/d in 2022, reaching 1.8 million b/d.  The export availability has boosted flows to (among other destinations) the US Gulf where refineries are replacing Russian fuel oil feedstock with heavy crudes from the region, but also to the ...

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Elevated CPI Likely to Push Interest Rates Higher

Sept. 16, 2022

US CPI rose 8.3% in August from a year earlier, as the higher-than-expected inflation report diminished hopes the Fed could scale back the pace of rate policy tightening in the coming months.  Inflation remains significantly above the Fed’s 2% target.  The firmer-than expected print is an issue on two fronts.  The first reflects the current state of inflation and its impact on people’s cost of living.  The second facet is how it will influence the Federal Reserve’s behavior going forward.    The market is now forecasting a terminal rate (peak of the benchmark interest rate) of 4 ...

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The Impact of Ghost Tonnage on DPP Tanker Supply

Sept. 9, 2022

One major complexity regarding statistical analysis of deletions is the fact that we must account for the overall behavior of conventional tanker owners, but also external factors such as ghost ships and other sanctioned vessels.  Our updated methodology measuring the impact of “ghost ships” and sanctioned tonnage emerged from the initial observation of the large number of vintage DPP tankers (mainly VLCCs) that were sold for premiums in the secondhand market.  These vessels continued trading utilizing techniques such as turning off their AIS transponders or engaging in open sea STS operations, raising the question of how these units should be ...

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Iran Sanctions Relief: Updated Analysis

Sept. 2, 2022

Following the Trump administration’s decisions to reinstate sanctions on Iran to thwart its nuclear ambitions, Iranian crude oil production averaged about 3.0 million b/d in 2021 and 2022ytd.  In a sanctions-relief scenario, we anticipate that Iranian production will regain the 4.0 million b/d within 15 months.

At the same time, we project Iranian crude oil exports to have settled at 0.9-1.0 million b/d, a derived figure after subtracting domestic refinery demand and condensate splitter utilization.  Regarding the latter, we estimate that approximately 27 Iranian-owned (NITC) VLCCs are engaged in floating storage operations ...

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