The Print

- Commercial Crude: +922 kbbl w/w (prior 426.40 MMbbl)

- SPR: -785 kbbl w/w (prior 284.55 MMbbl)

- Cushing: +553 kbbl w/w (prior 23.75 MMbbl)

- Gasoline: -1.68 MMbbl w/w (prior 206.05 MMbbl)

- Distillate: -2.25 MMbbl w/w (prior 107.43 MMbbl)

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Snapshot

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EIA Report last week.

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Last week. Brent -5.56% (-$5.75) Open $104.71 H $104.90 L $96.38 C $97.62

Articles

• France to Deploy Forces to Protect Saudi Red Sea Oil Port

• Aramco Restores East-West Pipeline as War Risk Closes In on Yanbu

• Aramco CEO Eyes “Fourth & Fifth” Oil Export Routes To Break Hormuz Chokehold

• Saudi Oil Shipments to Europe Cut After Drone Attacks

• Soaring Oil and Gas Prices Push Europe’s Inflation Fight Into 2027

• US energy secretary seeks refiners’ help amid narrow options to curb diesel price

• If Global Trade Breaks, It’s Worse Than 2008 | Ed Conway

• Unwanted in the US, old oil equipment finds a new home in Venezuela -

• Americas Offset Some Middle East Oil Supply Issues

• Saudi buffer runs thin, Atlantic barrels reprice

• Canada’s push to supply Europe with hydrogen is falling short

• At Least 2 Killed as Ukraine Strikes Industrial Sites Across Russia

• US Data Centre Power Demand Projected to Double by 2027

• Powering Intelligence 2026

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How did we get here? As we face the early winds of what is the largest energy shock in history, Europe is caught in the cross. Having given up Russian LNG and energy imports, we now rely heavily on The US for energy. We have traded a supposed Russian boogeyman for a manacle empire that will assert its dominance today.

Retailers are fighting for the diesel barrels on a global basis. There is not enough refining utility happening on the planet (with extreme focus on US, China, Middle East) to stem prices from continuing to rip higher. This is the phase of the war where we will get traditional demand destruction regardless of what price crude is. This is where product prices lift so high, that people change habits and stop buying as much, with industrial and agricultural hit the hardest. What comes next from The US administration will make or break modern society. Talk of a US diesel export ban hangs firmly in the energy narrative right now. Below are charts from last weeks EIA reports ‘Products’ section, where we can clearly see US exports of Diesel while inflecting back down, are still relatively high. Will the US simply curtail exports rather than an export ban? All we know is that thanks to 2 war fronts actively encouraged by ‘The West’, the globe has shifted to more reliance than ever in history on US energy exports. The petro dollar is secured! The whole show is simply a market share war. A Euro sandwich in a Trump/Putin bun!

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Bearish as f%^k

As late as Saturday, the large energy market intelligence community compiled their ship tracking and barrel counting data. And for the bulls, it couldn’t look any worse. Hormuz Strait Tracker has been doing a wonderful job at tracking ships and loadings 24/7 for many months now. Utilising 2 satellite feeds and using smart methods that some very expensive market intelligence firms have not. They have the average daily flows of oil now at 16.6mbpd, 83% of pre war flows. Specifically crude flows have recovered to 89% pre war.

Commodity context marked it as at 13.5mbpd and probably on the shy side. Kpler are quoted in Reuters as of 2 days ago at much lower figures of 33million for the week, so about 4.7mbpd and 49.2mb for the prior week, (7mbpd). Tanker trackers have it at 10.5mbpd. I tend to follow their number. So the spread continues to be a complete joke. But net- net, we see a market that overall is completely shrugging off Iranian and Houthi risk. Nothing unusual there!

So in summary.

• Hormuzstraittracker.com 16.6mbpd

• Commodity Context 13.5mbpd

• Kpler 4.7mbpd

• Tankertrackers.com 10.5mbpd

• Spread 11.9mbpd

• Mean 11.3mbpd

This is an insane spread, with a low of 23% of pre war to 83% of pre war levels. It is quickly easy to take the whole lot and turf them out the window. HOWEVER, the reason I want to cover this, is that in such situations, as is the nature of the market, it will trade the consensus and the greater narrative that is laid down. NOT the facts!

Counter to this bearish narrative, we cannot disregard the bullish elements still within the market. We have not completely cleared the risk factor of ‘what will Iran and The Houthis think of next’? Read The Net Net section below and The COT as there is a 20% change in MM flows.

Something is going on with China that has to be noted. The awesome Lakshmi Sreekumar has been tracking that their purchasing program has gone flat recently. A much loved element for the bulls in recent trade. Is this a sign of another step off global purchases?

Canada NOT YET… to the rescue!

Canada exported 5 million barrels a day last year and sent 4.3 million, nine in every ten of them to the US (Canada Energy Regulator). Its three main export pipelines ran 85% to 95% full. The only one that reaches the sea, Trans Mountain, ends in Vancouver and sends most of its oil to Asia. So Canada cannot ship its oil to Europe in this crisis. It helps another way. Canadian heavy crude keeps American refineries running, which frees up American oil for export, and the US was Europe’s biggest crude supplier last year (Eurostat). That help runs through Washington. There, the Energy Secretary is sounding out refiners on limiting diesel exports, and the President has called the associate-member idea a possible “hostile act”. So despite Carneys love-in Euro affair, America still holds the hose.

Gas is where the deal has substance, but it arrives late. Two German buyers, Uniper and SEFE, have lined up Canadian liquefied gas from a terminal planned on British Columbia’s Pacific coast, with first deliveries in 2032 (Natural Resources Canada). That volume is about 3% of the liquefied gas Europe imported last year. It lands five years after Europe’s ban on Russian liquefied gas, fully in force from 1 January, removes a volume more than four times larger. Canada’s Atlantic coast is eight days’ sailing from Rotterdam, six days closer than the US Gulf, yet not one export terminal or pipeline there has been approved. We have seen this before. The 2022 Canada-Germany hydrogen pact promised exports “starting in 2025”, and its flagship project was shelved this January. So has the love-in jumped the shark? The speeches have. The commitment is real, but every handshake is dated 2025 or 2026 and every delivery 2029 or later. The Montreal summit in late October is the test. If it names an Atlantic export project with a European buyer and a start date, the alliance is real. If not, this is a 2032 story and little respite for European energy prices.

Venezuela

Not much to say here, but important to note that YES, VZ exports to US have risen as we all know, but at the same time, Canada is dropping off in the last 2 weeks. Lets just keep an eye on this.

The Net Net

Below you get my rounded summary, the trade charts and spread trades I’m looking at and the COT for ICE Brent and NYMEX WTI and this week, I also have the diesel COT from both NYMEX and ICE.

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Notable this week

- Commercial Crude: +2.97 MMbbl w/w (prior 423.43 MMbbl)

- SPR: -405 kbbl w/w (prior 284.96 MMbbl)

- Cushing: +2.27 MMbbl w/w (prior 21.48 MMbbl) [notable]

- Gasoline: -1.69 MMbbl w/w (prior 207.73 MMbbl)

- Distillate: -428 kbbl w/w (prior 107.86 MMbbl)

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Snapshot

The call

This is a bearish crude headline built from two things that don't last: the export drop and refineries heading into autumn maintenance. It isn't weak demand. Low exports plus lower runs is a standard way to get a crude build, and the export number is noisy week to week. The part that matters for trading is Cushing: +2.3 mb is a big build for that hub and works against front-month WTI calendar spreads. The product draws on lower runs are mildly supportive for cracks.

Canada imports fell 1.1 mb/d and Saudi imports fell 236 kb/d. With exports also down 1.55 mb/d, this crude build came from less oil moving in both directions, not from strong supply. That supports the view that the build won’t last.

To quote one of the guys in the discord ‘‘Oh man we’re gonna have a full blown products crisis aren’t we’’…….YES, YES WE ARE

Chart of the week

At the pump

Crude

Production

Product

Exports/Imports

Refinery & Demand

That’s the report!

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Last week. Brent -0.71% (-$0.74) Open $107.11 H $109.80 L $101.53 C $103.87

Articles

• EIA Weekly inventory report- The Oil Report

• Flames, smoke seen near Riyadh airport; Houthis claim attacks on Saudi capital

• Mark Carney Speech to EU

• Some Gas Stations ‘Out of Diesel’ as Prices Surge

• Yanbu pipeline attack ripples across crude, freight and gas markets

• China presses Iran to help rein in Houthis after Saudi appeal, sources say

• Russian refining sector struggles amid intensifying Ukrainian attacks

• Hormuz shuttle tankers: An evolving trend amid the Iran War

• From Yanbu to Sohar: Tracking Saudi Arabia’s alternative oil routes

• VLCC rates reach uncharted territory

• Super El Nino may blow Europe’s gas demand forecasts off course

• Germany’s Merz promises relief plan ‘soon’ as pump prices hit record

• Norway’s Johan Sverdrup rises over $7/b to an all-time high of $19.55/b

• Goldman: China Is Buying Twice as Much Gold as It Reports

• Why are central banks moving their gold reserves

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Global energy markets have been rocked in the past 10 days. Houthi attacks on the Saudi Petroline, Sept 10th, have effectively knocked another 5% (5mbd) off already shaken global crude supplies. With levels of Hormuz oil transits rising in earnest, markets were underpriced for this risk, seeing global benchmarks such as Brent rise+$8. With a touted 6 weeks fix timeline to regain 50% of pipe flows, markets are already anticipating a resolution to the outage, with the Brent premium over WTI already pairing back rapidly. This ‘pricing out’ of the risk is translating into about a $4 pullback in Brent Wednesday through Friday pre-market trade.

There is significant doubt whether Petroline repairs can actually be delivered within a 6-week timeline, with experienced field operators from that part of the world speaking about a 3-month period as more realistic. Already workaround flows have resumed on the Petroline at a greatly reduced flow capacity. When fixed, The Saudis will have to vastly increase security. It remains to be seen if Trump will do anything about it, while The Saudi buys 48 more F-35 fighters (yet to get congressional approval). They are going to need them.

Hormuz & STS Transfers

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Hormuz flows are modestly bouncing (currently 8mbd-9.5mbd Kpler & Tankertrackers), aided by STS and Shuttle transfers. ‘Shuttle vessels’ pickup oil at The Omani port of Sohar- East of Hormuz and another closer to Fujairah. This oil either transfers to a nearby ship and transfers the cargo to go for final leg delivery, or it makes a much longer journey to India or Malaysia to transfer ships there for final leg delivery.

You can see where day rates on ships here become a major cost factor. Some freight rates at the moment are adding as much as $20 to the cost of a single barrel of its cargo.

Inflation

Tell me there is inflation coming without telling me there is inflation coming! More in the net net below.

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Refining end game

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A week ago Trump asked Zelensky to stop hitting Russian energy targets. Zelensky responded by hitting 5 key Russian refiners, knocking out almost half a million barrels. In the last 3 months, we have lost about 3mb/d of refining.

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The Net Net

A perfect energy led storm has set in over the skies. The inflation we have seen in the post COVID phase, came and went and from this vantage point, was finally ‘transitory’. Damaged and tighter energy flows now reverberate across commodity markets. Now the Houthi attacks and the reality of war are set to wake inflation again. The oil and dry bulk shipping rates are singing a canary song. A bout of 70s style inflation seems comically unavoidable.

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This weeks EIA report

This weeks report ‘Gloves off’

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- Commercial Crude: -640 kbbl w/w

- SPR: -403 kbbl w/w

- Cushing: -342 kbbl w/w

- Gasoline: +794 kbbl w/w

- Distillate: +1.58 MMbbl w/w

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Snapshot

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• This weeks full report ‘Gloves off’

• This weeks supplemental report ‘Current MEG Flows’

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Last week. Brent 8.84% (+$8.47) Open $97.05 High $109.97 Low $95.97 Close $104.32

Apologies for been late, but there is a lot to cover.

Articles

• Current MEG flows- The Oil report

• Weekly EIA inventory report- The Oil Report.

• Iran war live: Hormuz talks postponed and oil prices jump, as Houthi attacks on Saudi Arabia continue

• Yemen’s Houthis reach strategic island at mouth of vital shipping lane

• Trump declines Saudi crown prince’s call for US strikes on Houthis, Axios reports

• How Saudi Arabia Moves Oil Without the Strait of Hormuz: The Petroline East-West Pipeline

• Saudi oil output plunges to lowest since 1990 amid fallout from US-Iran war

• OPEC Sept MOMR

• Global AI stocks fall as industry chiefs call for slowing development

• Fed’s table is set for a rate hike, a first under Warsh

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“The Kingdom has chosen not to retaliate at this stage and to support the efforts of the Iraqi government” to allow Iraq to take measures to prevent attacks from its territory - Saudi Foreign Ministry, in response to targeting of East-West Pipeline,

Welcome to the third phase of the war- with long tails that will echo through the financial system for all of 2027 and well beyond. Let’s not pretend that there is a way to print our way out of this Trump/Netanyahu hole. They wanted a war, they got it and we wear it!

There is a sister report to this one, MEG region flows. There is simply too much to cover at this time to have in one article. The situation requires contextual and situational awareness that spans more than just one compact article. So please have a read. In short, we have about a 2mbd-5mbd outage from the system right now. We will wait to see how Saudi repairs deliver over this week. In my opinion, there are extreme shortcomings that will leave this bypass route exposed. Even if Saudi get the Petroline back to where it was, a doubling of major security assets will have to be made on this pipeline, simultaneous to a doubling of security around Yanbu and Jazan refinery.

Trump has already turned down any military intervention to help Saudi. I see this situation actually suiting American strategy, effectively attempting to solidify regional ideas about reliance on US protection. Though that reliance should now be questioned, given that exact protection failed to deliver anything over the last 7 months, unless you were Israel.

The Red Sea

Ansar Allah (The Houthis) stepped up maximum pressure in the Red Sea and across the West of the Arabian coastline, capturing several islands and ports inside the Bab al Mandeb strait. This effectively secures their complete dominance of the southern access to The Red Sea. The direct effects of this strategically strengthen Iran’s position even further across two of the three most important regional shipping routes. This is now forcing MEG region Asian exports into a 54-day transit time. A ship leaving Yanbu last week will arrive in South Korean on November 7th approximately.

More commonly referred to as the East-West pipeline, The Petroline has provided key relief to the situation in the Straits of Hormuz. Briefly, this line carries up to 7mbd of Saudi crude to the Red Sea port of Yanbu. In turn, Yanbu can load about 4mbd, however of recent weeks, this actual loadings have dropped to approx 2mbd in August. As The Houthis continue to assert domain dominance in the Red Sea, I could see this easily move to as low as 500kbpd or zero. There will be severe limitations to how Saudi can protect itself.

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Everything East is bid!

Chinese refiners are tuned to process the middle eastern grades of crude. Saudi Arab Light, Arab Heavy, Basrah Medium, and Upper Zakum. These are all effectively cut off from China. So if we look at the greater strategic goals of The US, a war to win is not really the target. The war to disrupt Chinese imports is the goal. Force China to eat into national SPR reserves and clip their energy security wings. That’s the real game. From this chart below, guess which grade of oil China buys? Yes, the Oman one.

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Articles

• This week’s ‘Gloves off’ from The Oil Report.

• Hegseth ignored Centcom, cut program ahead of Iran school strike: Report

• Closure of the Suez Canal (1967–1975)

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Total MEG exports

The Middle East Gulf region ships its oil through three channels only: The Strait of Hormuz, the Red Sea route via Yanbu/the Bab el-Mandeb Strait, and the Suez Canal/SUMED pipeline further north.

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All three are constrained at once right now. Gulf total oil exports stood at 13.0 mbd in August (IEA), nearly half of normal. The Red Sea route is capped by both a jammed Yanbu port and this current active Houthi campaign, and Suez only absorbs the overflow at more than double the sailing time-more below. Effectively, Suez is ‘downstream’ of the ‘hot war’, yet remaining critical from a transportation perspective. What follows walks each route in turn.

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Notable this week

• Commercial Crude: -4.45 MMbbl w/w

• SPR: -3.12 MMbbl w/w [notable]

• Cushing: +80 kbbl w/w

• Gasoline: -1.17 MMbbl w/w

• Distillate: +796 kbbl w/w

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