u/Lingonbero3465123

The US SPR which is kept in salt caverns, and a lot of commentators (non-engineers) are saying the 'operational limit' = 70mbbls. "else the caverns get damaged".

My theoratical question is there a way to get it to near 0. As a mediocre ex mining engineer i can think of several (costly) solutions (saltwater, chemicals etc), but am wondering if there is a simple, cheap solution.

It seems bizarre to me that an industry that can send a drill ship to deep offshore, send a drill to seabed several km from the water surface and then drill another few km into the earth, cannot figure this out if given the right incentives.

2. also a lot of commentators are talking about tank bottom in cushing as Last 10 % is sludge. Now theoretically if one were to take out every bit, wouldn't this mean that you just put chemicals to re-liquify oil and just siphon the last bit out.

The US SPR which is kept in salt caverns , and a lot of commentators (non-engineers) are saying the 'operational limit' = 70mbbls. "else the caverns get damaged" - (freshwater impacts the walls).

My question is there a way to get it to near 0. As a mediocre (ex) mining engineer i can think of several (costly) solutions {brine, chemical pump etc}, but am wondering if there is a simple, cheap solution.

It seems bizarre to me that an industry that can send a drill ship to deep offshore, send a drill to seabed several km from the water surface and then drill another few km into the earth, cannot figure this out if given the right incentives.

Saudi Arabia Restarts Crude Loadings at Major Gulf Terminal After Nearly Four-Month Halt - WSJ

I was a bull until this. IF saudi's are loading VLCC's they expect to be able to use the strait. *they may need to pay the toll* but they will get the oil out.

If someone had told me an Iran war is on and crude = $70 and there is no recession, I would call him mad. But here we are.

Edit 1. to clarify why i am bearish.

1. If these saudi owned VLCC"s get out, then its game over. Shows the strait is normalising, and perhaps even some kind of a backroom deal between the saudi's and iran.

2. Price signal. Oil = $70 with the war on. Yes, there is a reserve dump by US and depletion by china but still $70 is too low. My guess that Reserves is part of the story and pipeline movements & "dark flows" had an effect. The latter is normal with oil - it just finds a way eg. russian sanctioned oil, that is only understood in hindsight.

3. see commenter below. Their financial advisor is saying SPR goes 'empty soon'. This is very bearish! Unless her retirement account is several hundred million (possible), this is a 'mainstreet's Joe financial advisor'. If he knows, Everyone knows. The ordre of short term commodity newsflow/saviness- it is trading houses, commodity desks of i banks, i banks/hedge funds, long only, big private bank clients, joe mainstreet.

4. If this sub is right, then the best trade right now is to buy physical oil, put it in storage (~$1/month at cushing) and wait. this is a bread and butter trade for many trading houses for all commodities (did it a lot in the 90s at my former employer). But i haven't seen any signs or news reports that any trading house is doing that. The Trifigura, etc are by far the smartest in the room.

5. whats in it for iran? They will want to control the strait and toll it. But they will not blow up an oil tanker. Imagine an exxon valdez except in their strait. A environmental & diplomatic disaster. they will hit some container ships. etc. Maybe next 60 days = MOU duration = strait operates at 50% or so. i.e bearish.

6. Iranian supply -- this is the big kahuna. An unsanctioned iran will dump 2-3mbbls. longer term it will probably be more like 4-5mbbls or even higher. in 90s a lot of the oil analysts used to be ex engineers. the ones who had worked in iran would rave about how prolific it was. and then how underinvested it was. Basically long term an, Unsanctioned iran = $40 oil or wherever the break even for oil shale is.

7. SPR at 0 or theoretical 0 - who cares. All it means is there is no buffer in the system to absorb the next supply shock. But if the strait is normal the day before SPR is at 0, things are fine (ignoring transit time). Until the next supply shock.

8. Saudis - while the strait is their main conduit they have swapped to pipeline + yanbu. capacity constraint here is ~ 3mbbsl but i am guessing they are running at 4-5mbbls. And if news reports of ghawar being ramped up is right, then this supply disruption is well, transitory.