Thursday Night Links

• Say half of the 97 million barrels of oil that Rystad Energy estimates China has socked away so far this year had shown up in storage facilities at Cushing, Okla., instead. That would bring Cushing’s storage levels to 70 million barrels—slightly above the level that contributed to turning West Texas Intermediate futures negative in April 2020. Back then, sellers holding front-month contracts had to pay buyers to take barrels off their hands as they were worried there would be nowhere to store the oil. Sanctions are making it very difficult to judge where the market will head next. The result has been an unusually steady oil price despite growing oversupply. But any sign that the glut of sea oil is moving onshore could cause the floor to fall out from under the oil price. [WSJ]
• But the puzzling thing here is that despite such weak oil prices, why isn’t US crude oil production declining? As you can see in our production composite index, December US crude oil production should have started to decline, but the latest figure points to a production reading near ~14 million b/d. We still have more weeks to finalize this month’s data, but the fact that we aren’t seeing material weakness yet implies that production could be stronger than expected going into 2026. Part of the reason for the outperformance stems from Exxon. In Q3 2025, Exxon reported that Permian production averaged ~1.7 million boe/d. In its latest 2030 company guidance update, it noted that the Permian is expected to grow to ~2.5 million boe/d (+200k boe/d vs previous guidance). [HFI Research]
• After more than two decades of flat or anaemic growth, US power demand is now surging. Electricity usage is projected to rise by an average of 5.7 per cent a year to 2030, based on forecasts from utility companies. Though some of this demand is due to reshoring activity and a broader shift to electrifying buildings and transport, more than half of the expected increase stems from the rapid build-out of AI data centres, according to consultancy Grid Strategies. Even if these projections prove overstated, conservative estimates still far exceed recent trends, requiring substantial investment in grid capacity to accommodate new loads. [Financial Times]
• President Saddam Hussein of Iraq today openly threatened to use force against Arab oil-exporting nations if they did not curb their excess production, which he said had weakened oil prices and hurt the Iraqi economy. The Iraqi leader did not mention particular countries by name in his nationally broadcast address today, but his warning was clearly aimed at Kuwait and the United Arab Emirates. In the last few weeks, the Iraqi oil minister, Issam Abdul-Rahim al-Chalaby, has frequently singled out the two Arab nations, which have been producing oil at rates far above the quotas mandated by the Organization of Petroleum Exporting Countries, as the main culprits in the steep fall of oil prices in recent months. President Hussein charged that the oil production policies of Kuwait and the United Arab Emirates had been the result of American influence, seeking to obtain cheap oil and harm Iraq, among other nations. ''The policies of some Arab rulers are American,'' the Iraqi leader was quoted as having said by news agencies from Baghdad. ''They are inspired by America to undermine Arab interests and security.'' President Hussein said, ''Iraqis will not forget the saying that cutting necks is better than cutting means of living.'' ''O God almighty, be witness that we have warned them,'' he added. ''If words fail to protect Iraqis, something effective must be done to return things to their natural course and to return usurped rights to their owners.'' [The New York Times]
• China cannot buy what it wants from the US, either because the US will not allow the sales (high-end semiconductors), or because the US struggles to produce the goods (Boeing planes).
  The US can no longer buy what it really wants from China (rare earths, magnets).
  The US won’t allow China to sell what China really wants to sell in the US (higher value added goods such as cars, telecom switches, tractors, earth moving equipment, trains, nuclear power plants), even if US consumers would actually love these goods, and even need them. For example, can US farmers remain globally competitive if everyone else drives cheap tractors and they do not?
  What the US really wants to sell to China (soybeans, liquefied natural gas), China can generally get elsewhere (Russia, Brazil, Colombia) for less money and with greater reliability. [Gavekal]
• The airport lounge was created in 1939 by American Airlines’ C.E.O., C. R. Smith, as a way to build support for commercial aviation. Smith called his first lounge, at LaGuardia, the Admirals Club. (He referred to his planes as the Flagship Fleet.) Membership was private, free, and at the company’s discretion. A manual listed those eligible: generals, congressmen, governors, judges, members of the U.N. Secretariat, “persons listed in Who’s Who.” New “Admirals” were commissioned in faux naval ceremonies. Often, they’d get a writeup in the local paper. Smith would send personal letters about Admiral business. (“Dear Admiral: As you know, we are not permitted to extend membership in the Admiral’s Club to the ladies. . . .”) He’d sign off, “C. R. Smith, Fleet Admiral.” [The New Yorker]