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Oil and big data: how to flatten the crude curve

Scott Tong Apr 21, 2020
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An oil pumpjack in California. The industry is suffering from a glut that drove futures prices below zero. Frederic J. Brown/AFP via Getty Images
COVID-19

Oil and big data: how to flatten the crude curve

Scott Tong Apr 21, 2020
An oil pumpjack in California. The industry is suffering from a glut that drove futures prices below zero. Frederic J. Brown/AFP via Getty Images
HTML EMBED:
COPY

The oil industry needs to flatten its own curve. A new industry of satellite imagery, geolocation data and other artificial intelligence tools has cropped up to provide fast, independent information on where the crude is in the world.

Oil is the new data?

In the bad old days, info on drilling, selling, shipping and storing oil came after the fact; you had to wait a month, or six, for governments to tell you.

And sometimes they were lying.

Cheaters sometimes prosper

“The history of OPEC deals is that they take on quotas, and countries cheat,” said David Goldwyn, international energy consultant at Goldwyn Global Strategies. “1986: Venezuela was hugely cheating on its quota. They said they weren’t, and it was clear from the market impact they were.”

But now, big data in oil fancies itself a real-time BS detector. One example: satellite maps of nitrogen-dioxide pollution from cars and factories, corresponding to petroleum use. Note this GIF from the data analytics firm OilX comparing U.S. pollution last year to this year.

NO2 pollution, last year v. now

Clear skies, but not much energy use. The GIF for India looks similar.

“India has been lagging a bit [in the] spread of coronavirus,” Florian Thaler, the co-founder of OilX, said. “But now we do see indeed there has been a significant change.”

The collapse in oil use means a whole lotta crude is squeezing into storage tanks around the world. Here’s a tank farm in Cushing, Oklahoma.

Oil storage tank farm, Cushing OK 4/21/20

Look carefully: storage tanks have floating roofs that go up and down, so you can spot the empty ones. They kinda resemble empty green-bean cans where you can see all the way down.

Thaler sees tanks filling up fast, in places like Cushing and Rotterdam, in the Netherlands. “Rotterdam over the last two weeks we have seen a significant increase in stocks there,” he said.

Another oil analytics firm, Kayrros, turns satellite pics into cool 3D visuals. Like these representations of the critical Kiire oil storage facility in western Japan. Yep, filling up.

Put it all together, and oil going into storage is ramping up.

But what about the flattening?

So here’s where flattening comes in. Just as the world is trying to flatten the COVID-19 curve to avoid running out of medical capacity (hospital beds, doctors, ventilators), oil producers are trying not to run out of storage capacity

If that does happen, prices would crash, analysts say. And drillers would shut down wells, in some cases forever. If you stop pumping an old well, you can lose underground pressure to push the crude back up, explains oil scholar Amy Myers Jaffe at the Council on Foreign Relations.

“Some people are speculating that if Russia has to shut in its production … they will not be able to reopen them.”

Amy Myers Jaffe, Council on Foreign Relations

Thaler of OilX thinks the new OPEC+ agreement — in which Saudi Arabia, Russia, Norway and other key producers pledged on Easter Sunday to cut production by nearly 10 million barrels a day — will allow a “near miss” so storage doesn’t run out. Here’s his chart again:

One means of avoiding what the industry calls “tank tops” is stashing oil in tankers. That’s happening on a large scale, according to this OilX map loaded with stationary tankers around the world.

Location of “floating storage” oil tankers

And to eventually ramp the curve down, China has to rev its economy to burn more oil. There are signs. Here’s the NO2 pollution map of China, before and now.

At Kayrros, co-founder Antoine Halff sees Chinese industrial activity increasing as well, using satellite images and anonymized geolocation data from cellphones.

“We’ve been watching traffic in shopping malls, we’ve been watching road traffic, workers showing up at various factories,” Halff said. “And we’ve seen gradually a restart of economic activity in China.”

COVID-19 Economy FAQs

So what’s up with “Zoom fatigue”?

It’s a real thing. The science backs it up — there’s new research from Stanford University. So why is it that the technology can be so draining? Jeremy Bailenson with Stanford’s Virtual Human Interaction Lab puts it this way: “It’s like being in an elevator where everyone in the elevator stopped and looked right at us for the entire elevator ride at close-up.” Bailenson said turning off self-view and shrinking down the video window can make interactions feel more natural and less emotionally taxing.

How are Americans spending their money these days?

Economists are predicting that pent-up demand for certain goods and services is going to burst out all over as more people get vaccinated. A lot of people had to drastically change their spending in the pandemic because they lost jobs or had their hours cut. But at the same time, most consumers “are still feeling secure or optimistic about their finances,” according to Candace Corlett, president of WSL Strategic Retail, which regularly surveys shoppers. A lot of people enjoy browsing in stores, especially after months of forced online shopping. And another area expecting a post-pandemic boost: travel.

What happened to all of the hazard pay essential workers were getting at the beginning of the pandemic?

Almost a year ago, when the pandemic began, essential workers were hailed as heroes. Back then, many companies gave hazard pay, an extra $2 or so per hour, for coming in to work. That quietly went away for most of them last summer. Without federal action, it’s mostly been up to local governments to create programs and mandates. They’ve helped compensate front-line workers, but they haven’t been perfect. “The solutions are small. They’re piecemeal,” said Molly Kinder at the Brookings Institution’s Metropolitan Policy Program. “You’re seeing these innovative pop-ups because we have failed overall to do something systematically.”

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