Blue Lacy Advisors, LLC – Final December Crude Oil Market Commentary
Minneapolis, MN | January 12, 2023 | By: Steve Sinos, Blue Lacy Advisors, LLC
Weekly price volatility has been dominated by the same actors, namely large Asian importers. This isn’t necessarily a story of China reopening. There is growing disagreement among analysts about what the Chinese reopening means. The prevailing narrative has been that Chinese demand will spike on reopening and then grow in line with its previous trend. Chinese demand already matched 2021 levels; crude oil demand is approaching its all-time high of 16mm bpd. On average, Chinese waterborne imports have discharged ~11mm bpd during December, nearly 1.5mm bpd higher than the trailing 6-month average and up ~1mm bpd from November. Combined with domestic production of ~4mm bpd and any pipeline imports, Chinese refiners have ramped to about 15mm bpd of throughput. Consequently, the fear is that domestic Chinese product storage is approaching its limits, despite all but jet demand roughly in line with seasonal norms. Jet demand lags the 2019 peak of 650kbd by ~250kbd and trails 2021’s 450kbd by ~50kbd, but it accounts for only 3% of total crude demand, so it may not drive prices as expected. India (crude imports) and Singapore (clean products imports) are likely to be more meaningful contributors to the trend than China.
*This summary is based off December 30, 2022
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Meet the Author!
Steve has spent his career in strategy, risk, trading, and investment. He works with investors to source investments in opportunistic or high growth sectors, with particular interest in early-stage companies solving clearly defined problems.
He is currently a Managing Partner with Blue Lacy Advisors LLC, giving management teams and investors confidence in their decision making by supporting strategic planning and execution, risk management, commodity trading, and market analysis.
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