Apr 4, 2021

Thomas Thornton




So, everyone is talking about the indirect talks that the United States and Iran will hold in Vienna Tuesday as a part of broader negotiation to revive the 2015 nuclear deal, and the EU’s lofty goal of Iran returning to compliance within two months. I put the odds of this happening at close to 0% and I retain my stance that it will take years to rejoin this agreement.

Jen Pasaki gave a press conference on Friday about the talks and stressed that the US is not meeting directly with Iran, and this is “early talks” with a “long diplomatic road ahead” and that” we are clear-eyed about the hurdles ahead.” Iran will have to take significant steps to scale down the nuclear program and the US will have to decide steps for sanctions relief.

By Saturday, Iran shot back saying they reject indirect talks with the United States and the step-by-step lifting of sanctions.

On Sunday, Iran proxies launched two rockets that landed near an Iraqi airbase just north of Baghdad where American trainers were present. No casualties or damage were caused, an Iraqi official said. This is typical behavior for Iran when they do not like something, as a show of force. This certainly will not help in negotiations.

Expect a very long road ahead, especially when Congress has no intention of rejoining this agreement anytime soon. (I discussed this two weeks ago).


We have continued to consolidate and dips under $60 keep getting bought, this is structurally still bullish.



On Wednesday, Biden released his infrastructure plan, call the American Jobs Plan. A few points to highlight:

Fix highways, rebuild bridges, upgrade ports, airports, and transit systems. The President’s plan will modernize 20,000 miles of highways, roads, and main streets. It will fix the ten most economically significant bridges in the country in need of reconstruction. It also will repair the worst 10,000 smaller bridges, providing critical linkages to communities. And, it will replace thousands of buses and rail cars, repair hundreds of stations, renew airports, and expand transit and rail into new communities.

Deliver clean drinking water, a renewed electric grid, and high-speed broadband to all Americans. President Biden’s plan will eliminate all lead pipes and service lines in our drinking water systems, improving the health of our country’s children and communities of color. It will put hundreds of thousands of people to work laying thousands of miles of transmission lines and capping hundreds of thousands of orphan oil and gas wells and abandoned mines. And, it will bring affordable, reliable, high-speed broadband to every American, including the more than 35 percent of rural Americans who lack access to broadband at minimally acceptable speeds.

Build, preserve, and retrofit more than two million homes and commercial buildings, modernize our nation’s schools and child care facilities, and upgrade veterans’ hospitals and federal buildings. President Biden’s plan will create good jobs building, rehabilitating, and retrofitting affordable, accessible, energy-efficient, and resilient housing, commercial buildings, schools, and child care facilities all over the country, while also vastly improving our nation’s federal facilities, especially those that serve veterans.

Although I highly doubt much of this will pass, this is extremely bullish for commodities and oil and gas, if even a portion of this gets passed.



This ship is free! The last of the 422 backed-up ships traversed the canal on Saturday. This will have residual effects on backups at ports when ships arrive. I expect supply chains to continue to be affected for the next several weeks.


I wrote a separate note on Thursday, but here is the recap:

Easing for the entire group:

May 350k

June 350k

July 450k

Easing for Saudi Arabia’s 1M elective cut:

May 250K

June 350K

July 450K

There is still the month left of the full cuts, which is April. These adjustments start in May. Saudi Arabia’s minister pointed out that the summer is approaching and domestic demand will rise, so there might be a need to gradually increase output by 2H21. They will still continue monthly meetings and monitor the market closely, and reserve the right to make any adjustments to this plan.

Fundamentals have been greatly approving since last September, as I have been pointing out. Also, if we break this down, they are essentially increasing production by ~2 million b/d over 3 months but product demand is expected to rise by ~3 million b/d over the same period, this will still draw on global stocks. The goal here is to keep the market in backwardation, and this should accomplish that. In-kind, the crude oil market, as well as oil and gas stocks, are reacting favorably to this decision.


Gasoline demand continues to rise. According to Pay with GasBuddy data, Saturday gasoline demand rose 1.4% from the prior Saturday. Last week (Sun-Sat) closed with demand up 2.2% from last week


U.S. gasoline sales for 2021 have exceeded prior-year levels for the first time since last March, when officials first started to widely impose coronavirus lockdowns, according to a report on Tuesday from the Oil Price Information Service by IHS Markit. U.S. oil consumption crashed by 27% in April last year from the year prior, the Energy Information Administration said, as aircraft were grounded and people were forced to remain at home to curb the spread of the coronavirus.

Gasoline same-store sales for the week ended March 20 were 10.1% higher than 2020, said the report, which surveyed 25,000 fuel stations nationwide. Sales were still 16% below pre-pandemic levels.

Since the start of 2021, gasoline volumes have mostly ranged between 15% to 18% below prior-year levels, the report said.- Reuters


Global shipping continues to increase. This is good for bunker fuel demand. Contract season is in full swing and with port delays still rampant and demand high, ocean shippers will be paying premium rates and high insurance rates for the remainder of 2021 according to Freightwaves.

On Friday, the index for China-U.S. bookings hit a record high The nationwide index for inbound cargoes from all countries reached its highest-ever level on Wednesday The index also tracks bookings seven days into the future. A fresh all-time high coming next week.

This is good news for Bunker Fuel demand.


Iraq discussing $7 billion energy deal with Total (TOT).

Iraq is discussing an agreement with Total (TOT) to build large infrastructure installations, develop oil fields and produce gas. The minister said he expected the contract to be finalized before July. The relationship with Total will be based on targeting the low-carbon industry and capturing all flaring gas and is set to produce 1GW of solar energy in the first stage.

The total has been involved in Iraq since 1920, but the fact that they are considering adding to their energy portfolio there is showing commitment still to the oil and gas sector.


Shell, Cosan JV Raizen taps banks for mega-IPO in Brazil.  Brazilian energy firm Raizen, a joint venture between Cosan SA and Royal Dutch Shell PLC, has chosen four investment banks to manage its initial public offering, expected to be one of the largest this year, raising up to 13 billion reais ($2.25 billion), four people familiar with the matter said on Monday.

Raizen has picked Banco BTG Pactual SA, Bank of America, Citi, and Credit Suisse AG to be the main banks in the transaction, and is expected to add more to the syndicate this week- Global Banking and Finance

Brazil has had its fair share of problems recently, but after elections things should calm down.

ACTIONABLE TRADE IDEA: Long Cosan SA (CSAN) on dips to 14.00 and/or Long Petroleo Brasileiro S/A ADR (PBR)


This went under the radar this week.

Fujairah expects oil storage to triple by 2024 as ADNOC, other tenants expand facilities. The Port of Fujairah, the world’s No. 3 bunkering hub, expects its oil storage capacity to triple to 12 million cu m by 2024 as Abu Dhabi National Oil Co. and other terminal operators expand their facilities, an official told S&P Global Platts on March 28.

Abu Dhabi National Oil Co. is building in Fujairah underground caverns that can store 42 million barrels when they are expected to be finished in 2022. Two other UAE companies, Ecomar and BPGIC, are also expanding their storage facilities at Fujairah, one of the seven emirates in the UAE federation that is located outside the key chokepoint of the Strait of Hormuz. Sixteen storage terminals currently operate out of the port and storage capacity is set to exceed 11 million cu m by the end of this year, said Martijn Heijboer, business development manager at the port.

“We now see the volumes picking up over the last two years with ADNOC coming into the system both for trading and crudes in the near future, [and] terminal expansion from BPGIC and Ecomar: it is going to add up,” Heijboer said.

ADNOC launched on March 29 a new exchange called ICE Futures Abu Dhabi on which the Murban futures contract traded, a move that is expected to create a new oil benchmark and boost crude exports from Fujairah. Through IFAD, delivery of Murban, ADNOC’s flagship crude that accounts for nearly half of its production capacity of 4 million b/d, can take place in Fujairah, where most Murban volumes are already exported from. -PLATTS

*The need for more storage as volumes pick up is definitely a sign that fossil fuels are not going away anytime soon.*

The Expansion Plans

The Port of Fujairah, located some 70 nautical miles from the Strait of Hormuz, is mulling expanding its infrastructure to cater to increasing demand for business centered around its bunkering, oil and product storage, refining, and now increasingly trading activities.

The port may add a 10th oil berth to the nine existing ones and boost interconnectivity with the storage terminals as part of expansion plans.

Inter-terminal connections or ITTs rose to 12 million tons in 2020 from close to 11 million tons in 2019 and are forecast to grow further as storage operators boost trading among themselves, Heijboer said.

Overall total crude and product volumes handled at the port exceeded 120 million tons in 2020, up from around 110 million tons in 2019. The total figure includes volumes at the port’s own Fujairah Oil Tanker Terminals (FOTT), ADNOC’s 3 single point moorings (SPMs), VOPAK Horizon jetty, as well as Ship-to-ship transactions, floating storage, and bunkering at the anchorage.

Volumes at FOTT in 2021 are expected to be similar to 2020.

Future volumes will depend on the success of ADNOC’s launch of the Murban futures contract.

ADNOC already has “a steady flow via the SPMs with mostly serving the refiners in China, Korea, and Japan and now you are going to be trading on top of that,” Heijboer said. -PLATTS


Saudis Hike Oil Prices for Key Asia Market in Sign of Confidence

Saudi Arabia raised prices for oil shipments to customers in its main market of Asia, signaling the kingdom’s confidence in the region’s economic recovery.

The decision comes after the OPEC+ cartel, led by the Saudis and Russia, agreed to boost daily crude production by more than 2 million barrels between May and July.-Reuters


American Airlines to Put Most Jets Back in Service as Travel Rebounds. American Airlines Group Inc. expects to put most of its fleet back in service in the second quarter following “recent strength in domestic and short-haul international bookings” that hint at a gathering travel rebound.

Company says domestic aircraft are now operating 80% full.

Jet fuel is the weakest end market and is the last to recover. This tells us that COVID’s lasting impact will not be on demand but on supply = structural bull market


Stricter lockdown rules in parts of Europe are showing up in traffic data and fuel use as governments battle against another surge in coronavirus infections across a continent that’s still largely unvaccinated.

Rome, Paris, Madrid, and Berlin on Monday morning all had less traffic congestion than a week earlier, according to location technology company TomTom NV. A road journey in Paris at 8 a.m. on Monday that would take an hour on empty roads had 22 extra minutes of congestion, down from 26 minutes a week earlier and 40 minutes two weeks earlier. The latest congestion level is 50% less than typical 2019 levels for that time of the week.

Further east, in Poland, passenger car traffic in the week ended Sunday was 16% less than the same week in 2019, a wider gap than 12% a week earlier, according to automatic measurement stations monitored by the country’s General Directorate for National Roads and Motorways. On Tuesday, Poland’s Health Ministry reported 20,870 new coronavirus cases over the previous 24 hours, a 25% increase from a week ago.

Air traffic is improving globally, though more notably so in Asia and North America, which are broadly speaking about one-third lower than the equivalent week in 2019, using seat capacity estimates from OAG Aviation.

Latin America, the Middle East and Africa are about at half strength and Europe trails in last place, at 71% below

2019 capacity, according to OAG. Separately, data from Eurocontrol shows air traffic in Europe on Monday was 62% down from two years ago.

A global estimate of all commercial flights on Monday from FlightRadar24 shows activity was 29% lower than two years ago. That’s a significant improvement from the middle of February, when the gap was 45%.

Road Traffic

Air Traffic

US traveler throughput….this is a fantastic rebound, compared to where we were


I feel like I keep repeating this, but natural gas will continue to be important not only as a transition energy source, but for an important source in Africa as they build out infrastructure.


President Muhammadu Buhari promised on Monday that his administration would use the nation’s abundant gas resources for industrialization.

Buhari said the rising global demand for cleaner energy sources offers Nigeria an opportunity to exploit gas resources, adding: “we intend to seize this opportunity.”

He spoke at the Nigeria International Petroleum Summit (NIPS) 2021 Pre-Summit Conference and the official launch of the Decade of Gas in Abuja.

The President explained to participants at the Conference why his administration has prioritized. gas development with remarkable progress.



China demand for natural gas: no slowing down

Natural gas demand is forecast to grow between 7% and 8% per year out to 2022 which is driving the increase in pipeline and LNG imports. Demand from the city gas sector grew in 2020 to record 35 Bcm/y, but was flat in the industrial, power, and petchem sectors at 208 Bcm/y. – Global LNG Hub

Source: Global LNG Hub
Source: Global LNG Hub


European LNG imports surpass previous high March



On Monday, the Australian government relied its Resources and Energy Quarterly Report. The nation’s resource and energy exports are set to reach a record A$296 billion ($226 billion) in the fiscal year to June 30, 2021.

Australia is the world’s largest exporter of iron ore, liquefied natural gas (LNG) and coking coal used to make steel.

It ranks second behind Indonesia for thermal coal and third in shipments of copper ore, and is a major producer of both aluminum and alumina, the raw material used to make the refined metal.

Australia is also the world’s third-largest gold producer and the biggest net exporter of precious metal, and is a top supplier of battery metals such as nickel and lithium.

The stellar performance for the country’s resource sector this fiscal year was largely driven by top export iron ore, which is forecast to account for A$136 billion, or just under half, of the total value of exports, according to the report compiled by the Office of the Chief Economist of the Department of Industry, Science, Energy, and Resources.

This is up from A$104 billion iron ore exports in the 2019/20 fiscal year, achieved on both higher volumes (up 4%) and prices (up 41%).- Reuters

If you are a commodities bull, as I am, show this report to the skeptics!


Platts: Iron Ore & Steel Outlook for Q2: Iron ore prices to stay high on strong steel output.

High iron ore prices are tipped to continue into Q2, supported by rising steel production and reduced steel inventories, according to the latest S&P Global Platts Iron Ore & Steel Outlook.


Platts:  China’s alumina and aluminum demand and output are expected to continue rising in the second quarter of 2021, while alumina price levels will likely remain unchanged amid strong domestic output, according to the latest S&P Global Platts China Alumina & Aluminum Outlook.


Another item under the radar this week.

The Simandou mountains, a 110km (68-mile) range deep in the interior of southeastern Guinea, is home to the world’s biggest untapped supply of high-grade iron ore.

The huge project, which holds an estimated 2.4 billion tonnes of iron ore graded at over 65.5 per cent.

Although the presence of commercial-scale high-grade iron ore was confirmed in 2002, the Simandou mine has remained undeveloped because there is no railway line to transport the deposits to the sea for export. The project is also mired in political uncertainty and legal wrangles, including disagreements over who will develop the iron ore deposit.

But in 2019, a China-backed consortium – SMB-Winning – won a US$15 billion contract to develop blocks 1 and 2 of the development, after Israeli billionaire Beny Steinmetz ended a seven-year dispute with Guinea’s government by relinquishing his claims on half of the mine. Anglo-Australian mining giant Rio Tinto (RIO) owns a shade over 45 percent of blocks 3 and 4, while Chinese firm Chinalco holds just under 40 percent and the Guinean government owns the rest.

The SMB-Winning consortium, which wants to ship iron ore from Guinea within five years, comprises Singaporean maritime firm Winning Shipping, Guinean-French logistics company UMS, Chinese aluminum producer Shandong Weiqiao and the Guinean government.

If finally has a start date of 2025.


Total copper demand for the EV sector is projected to rise from less than 500,000 tons today to nearly 1.5 million tons in 2025, and to 3.3 million tons in 2030. Copper’s dizzying rise in price, from a low of $4,617 per ton in March 2020, is partly due to rising anticipated demand from the EV transition and its requisite infrastructure.

In total, it is anticipated we will need to produce the same amount of copper in the coming 25 years that the world has produced in the last 5,000 years to meet consumer demand, including the needs of the EV transition and wider electrification goals. However, the U.S.’ capacity to produce and process copper has yet to rise with it. -Real Clear Energy

COMMITMENT OF TRADERS -as of Tuesday, March 30

COT on commodities in week to March 30 saw net selling in 16 out of 24 major contracts. The total net long dropped by 163k lots to 2.26 M and lowest since early December.

Despite rallying 5%, the biggest reductions hit oil with Brent at a 4-mth low. Outside energy, the agriculture sector saw the biggest reductions led by soybeans, wheat, cocoa, and sugar The corn long reached a 10-yr high ahead of bullish planting report



The global inventory surplus has now fallen by 78% to 98MM Bbls. Given Saudi’s cautiousness on variants yet ongoing demand normalization (US flights now -30% pre-COVID as an example) $60(ish)WTI floor intact with $70 potential in 2H on further demand normalization. -NinePoint Capital


The amount of crude oil held around the world on tankers that have been stationary for at least 7 days rose to 105.35m bbl as of March 26, Vortexa data show. 

* That’s up 4.5% from 100.77m bbl on March 19 

* Asia Pacific down 1.5% w/w to 71.81m bbl 

* Europe up 39% w/w to 10.72m bbl 

* Middle East down 31% w/w to 6.14m bbl 

* U.S. Gulf Coast up 32% w/w to 4.64m bbl 

* North Sea up 12% w/w to 4.26m bbl 

* West Africa up 197% w/w to 2.40m bbl

**I want to note: Much of this rise was due to Suez Canal back up**



Refined product stocks climb to 4-week high on fuel oil rebound.

The total was 19.287 million barrels as of March 29, up 9.1% from a week earlier and the highest since March 1, according to Fujairah Oil Industry Zone data released exclusively to S&P Global Platts on March 31.

Heavy distillates, fuel oil for marine bunkers, and power generation stood at 8.236 million barrels as of March 29, up 16% from a week earlier when it stood at a two-year low of 7.115 million barrels.

Middle distillate stocks including gasoil, diesel, jet fuel, kerosene and marine bunker gasoil stood at 3.523 million barrels as of March 29, down 3.6% from a week earlier, at a two-week low. Some 430,000 barrels of gasoil were headed for Yemen in the week started March 15, the biggest shipment to that country since Sept. 21, according to Kpler.

Light distillate stocks including naphtha and gasoline rose to 7.528 million barrels as of March 29, the most in two weeks and up 8.9% from a week earlier. -PLATTS

We are still well below the highs from just a couple months ago. This is a solid report.


Small draw in stocks this week of about 1.8M barrels…stocks are not out of line with this time of year and still well within the five-year average.

Nice gasoline draw, demand is strong, we are below the five year average.

We had a distillate build, but not concerning.

Another 2.0M draw, I expect more draws as we head into spring/summer due to farming, outdoor dining, and BBQ’s ….this is very bullish NGL producers.