194 - Aramco reports record profits | Domestic flights fall by 17$ | Dr. Dean Foreman with the API

Energy Week

Oil giant Aramco reports record first quarter as oil prices soar
https://www.cnbc.com/2022/05/15/aramco-worlds-largest-company-reports-record-first-quarter-as-oil-prices-soar.html
- Aramco not doing share buybacks like other oil companies. Awarding 1 share for every 10
- increasing capacity to 13 million bpd by 2026/2027 but will they ever produce that much?
- the longer Saudi Arabia fails to produce up to its OPEC quota the more people will believe they can't. Damaging narrative could push oil prices up more.
Domestic flight bookings fell by 17% in April as air fares continued to rise
https://www.businessinsider.com/domestic-flight-bookings-fell-17-in-april-as-fares-continue-to-rise-2022-5
- can't go anywhere for less than $700?!
- will this crimp the economy and demand?
Can China preserve both its economy and its zero-tolerance COVID-19 policy?
https://www.latimes.com/world-nation/story/2022-05-06/can-china-preserve-both-its-economy-and-its-zero-tolerance-covid-19-policy
- Will China just never open up again?
- Will it keep its people inside China?
- Impact on Belt Road initiative. Tourism to places. What does it mean to US companies with offices in China?
- How much of global oil demand is based on global travel between China and rest of world?
Dr. Dean Foreman and API
- highest quarter of US petroleum demand in history. but US economy contracted in Q1.
- Tale of 1st 2 months and last 2 months. January and February were very high. Pulled back in March and April data shows big drop. 19.3 million bpd demand.
- Biggest change is in intermediate products in petrochemicals. Consumer goods are slowing down.
- Motor fuels and price repression: seeing some of that. gasoline demand has leveled off even though seasonally it should be going up. Distillate demands going down. Over $6/gallon for diesel in some states is causing fuel substitution.
- Supply side: would suspect that given drilling activity increases should see more oil and did see that - increase of 100,000-200,000 bpd but NLGs went DOWN.
- Demand outpacing supply, which didn't increase on whole.
- Fewer DUCs, rig activity not increasing. Oil services costs are escalating.
- All of this means need even more drilling activity to get back to 2019 production levels. Demand is back at 2019 levels.
- Started year as net importer. But with Russia/Ukraine now having record pull for US exports. Crisis period with global refiners pulling oil and product out of US, adding to price pressure. Normally being an exporter is a good story, but when you are short on product that's bad for prices.
- Trade is working great on West coast, but East coast not doing well because they generally trade products with Europe, and that's under pressure in Europe.
- Historically has been very resilient system but unprecedented times and discontinuities and uncertainties about how much Russian crude is lost from market.
- Likely we are seeing demand destruction. Summer driving season increase will be muted. But with airline prices up, people may drive more (fuel substitution).
- lowest commercial crude oil inventories since 2014. normally through April 2022, year to date, you would be building up inventories as refiners draw on inventories to spool up for summer driving season. Average build over decade (excluding 2is 020) 40 million barrels. This year 1.8 million barrels.
- SPR. DoE wants to replenish SPR soon. Signaling to market that starting in fall would like to replenish. Expect supply response.
- EIA thinks less than 1 million bpd lost. But IEA saying as much as 3 million bpd lost by May.
- Price reaction to uncertainty over how much Russian oil is lost to market.
- If we release 180 million barrels from SPR over next several months will have lowest inventories since 1983.
- Political reactions to high prices: NOPEC legislation (lift anti-trust legislation) Price controls (unlikely to get much political support), proposals to re-ban oil exports from US.
- No US policies are supporting return to big production
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