Before proceeding with this post, please directly read the original source for the full context for the graphs, which I will also reproduce here for convenience. The author is Rory Johnston and I highly recommend following his Substack and Twitter for some industry insights.
Here is the full album of graphs.
Graph 1 shows how inventories deviate from their average. Decomposing them into crude and refined show the main problem is in the crude sector.
Graph 2 breaks down the drawdowns into segments. You can see crude and distillates are big drivers (diesel, jet fuel, and gas oil), while gasoline is mostly fine. Graph 3 separates into different graphs the inventories. Notice how gasoline is actually on the uptrend. Both Graph 1 and Graph 2 show just how steep the drawdowns are, which is why today's oil supply crisis is so noticeable.
The last part of Johnston's post is on a peculiar trend in S. Arabia: Graph 4 shows that even during Covid's trough in oil demand and ever since, oil inventories have been on a steady decline. The Saudis have decided to not hold onto as much inventory, and this is different from the inventory drawdowns elsewhere in the world.
This was an extremely brief summary of the article, and I suggest directly reading his article, not my highlights.
What's the takeaway? It's not too late to get into some parts of the oil market, especially those most severely affected by the drawdowns currently. These graphs suggest that the retail gasoline market is already starting to cool down, but clearly the crude/distillate markets have little relief in sight.
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