Podcast #27: Anas Alhajji – Oil

In today’s episode, Marcelo López spoke with Anas Alhajji, a partner at Energy Outlook Advisors, as well as an internationally recognised author, speaker, researcher and specialist in the energy markets.

Anas begins by discussing how the issue of the types and quality of oil is important and how that impacts the world trade in this commodity. In this context, he talks about the characteristics of shale oil produced in the USA, the structure and capacity of North American refineries, the country’s exports and imports of oil, the future demand for oil products and the impact of natural gas on the market.

Alhajji talks about the sharp drop in the price of oil this year and how the crisis that the sector is going through is unprecedented and the inconveniences and uncertainties that this creates for OPEC. He talks about his expectations regarding the impact of the coronavirus on oil demand and price.

Anas highlights in his analysis the influence that the American presidential election has on oil producing countries and how this is a decisive factor for the price of the commodity in 2020.

Alhajji points out that the years 2021 to 2023 should be very interesting for the sector and predicts a major global energy crisis, to which he attributes different factors, such as, the underestimation of future demand for oil products and the hype of electric vehicles.

Anas also states his point of view on the dynamics involving shale oil from the United States and Canadian tar sands.

When it comes to investment, Alhajji talks about how he prefers to position himself and where he sees more value along the sector’s production chain. He also lists the main risks he sees for the sector and what can be done about the crisis he foresees.

Alhajji discusses his point of view on the expectations of oil demand made by many analysts and the exaggerations that these analysts make when estimating the impacts of certain changes.

2 Comments

  1. Dave Davis says:

    Anas – Great presentation. I want to focus on one portion – the EIA and U.S. weekly crude inventories. First, quick intro – I am a former CFO of a very large petroleum trading company, and I have spoken to EIA several times. It is my opinion that with the increase in domestic production (light oil and NGL’s, and in between), of about 9 mm bopd, over the last 15 years, reported inventories dramatically increased. The reason for this is that domestic production is counted by EIA (Drilling Info) basicly just about the time it reaches the surface. It’s tracked in collection systems in the fields, (pipelines and related, required storage tankage), and also the transmission systems which also include additional pipelines and related tankage- at both input and output locations – just think of all the MLP’s that have sprung up and increased in size in a big way. That’s all reported to EIA, and counted as and reported inventory by them.

    If you look at the detail of inventory or stocks on their site, you will note there is two types of inventory in their minds – Refinery Stocks and Pipelines and Tankage. A quick look shows that over time, all of the increase inventory has come from the latter. But, obviously a lot of this inventory is unusable – it’s “in transit’.

    You would probably say – well that’s just the waterborne imports that were the previous in transit inventory, which were reduced by domestic production in transit. That’s what I thought – at first. But, in talking to the EIA, they told me that the say 45 days imports on the water in transit, they are not counted. In fact they are not counted until reported to Customs. The EIA told me that sometimes the vessels can or choose to report as much as two days early ( before discharge at or very near refiners’ tanks) – so the services that count tankers and depth in the water are mostly worthless – except for floating storage.

    So, you can see that as domestic production has grown and “stores and snakes” it’s way to refining markets, reported inventories by the EIA have increased. As you know, IEA and the rest of the world look to the EIA for their sense of trends and levels. I suggested to EIA that they should explain this to the market to send a better price signal, they didn’t respond to me. And, this is after they acknowledged to me “ that as domestic production increases, it should back out some waterborne imports, and that should have the effect of increasing reported inventories or stocks”.

    One last quick note which might help your thinking on this – all reporting to EIA (storage and pipeline), is reported by the holder or warehouseman, not the owner. This is very important. So, all of this said, it is my opinion that the physical market is much tighter than the “financial market’ thinks. If I am correct, it brings your 2021 – 2023 crisis in a bit. I think it also contributes to a higher for longer scenario. We’ll see. Best regards. Dave

  2. David says:

    Anas, I really enjoyed listening to the podcast.
    Around 2021-2023 the crisis hits.
    I don’t completely understand the crude quality issue
    and the effect on the oil prices. Are you suggesting oil
    prices will go way up and if so, Wti, or Brent, or both?
    Thank you very much!

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