Explain. Uh yes. So I think the main
thing that's been challenging to the oil market right now
is we've seen distinct weakness in the very light end
of the barrel. The liquid liquefied petroleum gasses,
ethane, propane, butane, even NAFTA, which
are heavily dependent on the manufacture petrochemical cycle. In
contrast to that, we've seen the reopening of the
Asian markets, China, in particular, which is
leading to service related demand growth and jet fuel,
diesel and gasoline. And we've had a pretty big
bifurcation. The light end weight though is really showing
up and pressure on the very light end oils,
which has actually been the crude oil that we've been
able to grow globally. In part because of the
growth in the US production. In contrast, much
like in the bifurcation, refined products, we've seen
a reduction in the medium and sour crude oils that
key OPEC producers export. So we've seen this growing
detachment between different parts of the barrel that I think
has been sending conflicting signals to the oil market.
In my view if we see, sorry, sorry
to interrupt. But I'm curious if, if you
just kind of explain though. So I mean,
what kind of drove that bi though? I mean
, I know some of it probably had to do
with the war in Ukraine and then the sanctions on
Russia. But were there other factors as well?
Well, there's been a real turn down in the
energy intensive industries in Europe, in particular, where
we have seen, if you look at the IP
indices, the new order indices, you actually back
out industrial demand from looking at daily pipeline consumption statistics
. We have not seen any rebound in European energy
intensive demand that has led to a depressing force on
petrochemicals and petrochemicals really is the linchpin for a lot
of these lighter molecules and drive a lot of the
demand for them. So if you a weak manufacturing
and durable goods cycle, that's where the the the
weight is is most pronounced. And I think that's
the primary driver of that challenge in that end of
the market. So for those of us, Greg
who don't know this industry as well as you do
, we look of course, a lot of times
to crude products to energy products overall as kind of
a barometer for economic conditions as a barometer. What
is it actually telling us about economic conditions? Well
, it says the service sector is doing quite well
. If you look at the strength in the diesel
market, you look at the gasoline market, you
look at jet, we've seen a real turn up
in demand. You know, if you look at
2023 demand estimates today versus six months ago. The
demand estimates are 4 to 500,000 barrels per day higher
. That's like 0.75% GDP increase if you, if
you think about it in those terms. So that's
real strength. But there is real weakness in the
manufacturing sector and there's real weakness in the petrochemicals and
that's undeniable. So it really is a very much
a split picture. And I think the thing that
would really be a catalyst for higher prices on oil
is if we do see the manufacturing demand, the
petrochemical demand turn higher.