Anton Likhodedov

I respect Jukan, but I feel a little frustrated whenever I see this kind of argument. You can build any scenario around plausible assumptions, and yes, of course, the outcome will follow from those assumptions. If you assume demand collapses, customers accumulate inventory, and contract terms get renegotiated, then naturally, memory companies’ revenue and profits will decline. But honestly, this feels like the perspective of analysts who treat memory as just a commodity you manufacture and sell, without properly understanding the technological changes taking place in custom memory. Who exactly are these customers we are talking about when we say they could cancel LTAs or defer deliveries? They are the very customers working with memory companies to design the next generation of HBM and 3D stacked DRAM. After jointly designing and validating these products, can customers really cancel those volumes so easily or push deliveries out by one or two years? How would they manufacture their own products, which were designed around that memory? What happens to the launch and system deployment schedules they have already coordinated? Switching suppliers also raises questions of design compatibility and requalification. If you are going to argue that contracts can be adjusted, you also need to explain what that decision would mean for the very customers canceling them. This is one of the biggest reasons I keep saying that memory is no longer the same cyclical industry it used to be. The parties to these LTAs are already tied together from the design stage. But if you still view memory simply as a commodity where rising prices lead to more production, and inventory buildups lead to price cuts or canceled orders, you will inevitably miss this shift in the technical and business relationships. One more thing. These arguments about a collapse in memory demand seem to assume that planned AI data center investments will be canceled on a massive scale, or that AI infrastructure expansion will slow so substantially that memory demand falls sharply. What interests me more than whether contracts can be adjusted is why you expect demand to weaken that dramatically in the first place. I think it would be more realistic to discuss directly whether the AI era we expect will actually fail to materialize, and whether much of the AI infrastructure investment currently planned will disappear. If that is your outlook, I can at least understand why you would expect memory demand to collapse and customers to cut volumes even for products they have jointly developed.

North Sea vs WAF headlines look really weird these days: Vitol raised bids for all (North Sea) benchmark grades to new records, surpassing previous highs in early April. vs Exxon Mobil bought Hungo from Eni at the lowest price for a WAF cargo on the Platts window in data compiled by Bloomberg going back to 2011. I guess dates / freight / grades / quality etc ... but still market looks pretty f&*ked up. ************************************************ North Sea: "Forties, FOB:Vitol bid Oct. 20-Nov. 5 at +$24.05, vs +$22.50 on Monday Ekofisk, FOB:Vitol bid Nov. 1-3 at +$21.80, vs +$20.95 on Monday Brent, FOB:Vitol bid Oct. 20-Nov. 5 at +$25.60, vs +$24.15 previously Oseberg, FOB:Vitol bid Oct. 28-Nov. 2 at +$22.45, vs +$21.55 previously Troll, FOB:Vitol bid Oct. 18-24 at +$25.90, vs +$24.45 on Monday" and on the same day: WAF: "Exxon Mobil bought 950k bbl of Angola’s Hungo from Eni at Dated -$19.60/bbl (the lowest price for a WAF cargo on the Platts window in data compiled by Bloomberg going back to 2011) for Nov. 19-20 loading: trader monitoring windowThat’s the weakest observed deal price in the window for a West African cargo in data compiled by Bloomberg starting from 2011 Cargo previously offered at -$9.90 on Oct. 2, -$2.70 on Oct. 1 TotalEnergies offered 920k bbl of Republic of the Congo’s Djeno at Dated -$23.10/bbl for Nov. 24-25 loadingThe company withdrew an offer at -$16.05 on Djeno for Nov. 10-11 loading on Oct. 5 "

Yesterday was a rare day where both Semi Bulls and Energy Bulls got obliterated… ..: only difference being the Energy Bulls are used to it and hardened by battle vs Semi Bulls started trading in 2023 and have soft hands like babies 🥹

PHYSICAL PREMIUMS #3: SCARCITY OR "MANIPULATION"? will have another go at this. Btw, if you are relatively new to crude and get overwhelmed with terminology, take a look at my article that explains what Dated Brent is: nitter.gq/ALikhodedov/status/204… While a large part of the current market mess is explainable with fundamental factors (like crazy high freight) one part - seeming destruction of intertemporal substitutability in North Sea market (i.e. postponing consumption by 1-2-3 weeks for a much cheaper price), manifesting as extremely steep backwardation in the very front of the Dated Brent curve - looks weird to me. Why? Because crude commercial inventories are actually not that low- the market is of course much tighter than before but e.g. EU onshore crude inventories are close to last year level and 5y average. How big is the problem? Let us look at some examples: On Sept 15th - 3 weeks ago we had the following in the Dated window: Vitol bids Oct. 2-12 at (Dated Brent) +$15.50 FOB Total bids Oct. 7-9 at (Dated Brent) +$14.95, FOB If those bids were filled they would be loading now. And what price would the buyer pay? Well, Dated Brent fixed at $136 yesterday. So the buyer will pay north of $150. At the same time someone loading WTI in USGC would probably pay - what - 95-100? (if I am wrong please correct me). Why is this $150 happening - especially when ICE Brent is "just" at 104? Two reasons (or rather 2 instances of the same reason): Someone (like for instance, Vitol) is bidding cargoes loading in 3 weeks at Dated + $25 - effectively putting the price tag for 3w delay at $25 dollars. This is how you get from levels close to ICE brent (3w forward Dated is just $5-8 above Dec ICE brent) to Dated Brent ($136). This pushes up the Dated fixing. And the same someone was doing it for the last 3 weeks (albeit at lower levels - at +$15.5 - as in example above) - thereby pushing today's price at loading above $150. Btw we do not need to cry for poor Vitol or Total or other traders - they are long CFDs for the same dates and surely make more money on the derivative side than it costs them to bid physical side. The problem of course is that there is physically impossible to arb these high levels - too little time, contracts are fixed etc - so you cannot ship cheaper crude from elsewhere (not to mention freight). But the end result is that you get very high landed prices in Europe and refiners struggle to make money even with current high cracks. Because Dated Brent is not some obscure benchmark, but the one that is linked to trillion dollar worth of purchase contract (annually). Normally the solution to this would be inventory - basically buyers should not be buying, but drawing inventory - and this is what backwardation incentivises to do. And crude inventories are not that low (unlike products). Yet for some mysterious reason it does not work .... Is this disbalance appropriate for the current distress level or it is the result of traders' games? I have no clue ... maybe a bit of both.

This Oil Tanker Tycoon's WhatsApp Messages Drive Big Market Moves The Iran war has thrown a spotlight on the arcane system used to price the world’s shipping contracts, and the centuries-old London institution that manages it. #oott bloomberg.com/news/articles/…

Thanks, @tracyalloway and @TheStalwart - was a good episode, as usual. Wanted to expand on the topic of wealth tax that you mentioned at the end and both seem to be interested in. Would be great if there was an episode focused on the practical possibilities of implementation? With someone who is not an ivory tower economist, like Zucman, but actually understand how taxation/capital movements work in practice. The idea of taxing wealth is understandable - esp. now - when there is less certainty about incomes due to AI revolution. I frankly would be ok with it even if the bar was set low enough so that I myself would pay it - assuming that the government in exchange would stop trying to raise my other taxes (CGT, income). But the possibility of effective implementation - especially somewhere like Europe where people can and have been moving to lower tax jurisdictions regimes - even within the block with relative ease - is unclear. Zucman, Piketty etc pretend that the problem does not exist and that flight risk is low. Or talk about global solutions that have no hope to be adopted. @DanNeidle was arguing that in the context of the UK wealth tax does not work - taxpolicy.org.uk/2025/07/22/… He has several case studies; I do not think the list is fully comprehensive - e.g. it does not include Netherlands, where capital was taxed on "deemed return" recently, but as far as I know this Dutch tax also did not raise a lot of money - something like 0.5-0.7% of GDP (I could be wrong here). Anyway, would be great to understand if there is a hope for a workable implementation that would raise material (say at least 1-2% of GDP) amount of revenue. Or we should just forget it - and maybe taxation of AI billionaires should happen on companies' level (taxing tokens, robots etc).

Our new Commodities Quant Lab @CarnegieMellon is finally launched. I'm thrilled with an opportunity to lead it and wanted to thank many folks who already reached out with various collaboration ideas. Please spread the word. cmu.edu/mscf/news/carnegie-m… cmu.edu/mscf/commodities-qua…

PHYSICAL PREMIUMS: ALL TIME HIGH AND LOW ON THE SAME DAY Organised my thoughts on North Sea physical prices (being record-high premium-wise as of 2 days ago) vs other regions (esp WAF, which is record low) - discussed in the post below and here: nitter.gq/ALikhodedov/status/210… Thanks to those who replied. The disparity can be indeed explained by a combination of factors - timing: e.g. WAF loadings references end of November, while Brent window is end of October (on average) + voyage time for arbs. With a hugely backwardated Brent structure (e.g. on Oct 5th - previous peak in physical premiums - this week CFD was +25, while 4th week (end of October) is +5.9 and end of November is +3.7 (which is vs Jan BFOET swap - which is pretty much equal to Jan ICE Brent future, not vs Dec like October CFDs) - so another $5.5 difference vs end of October .... So by the time the oil from another region could arrive large part of the disparity would disappear, eaten by the massive backwardation in Brent - crazy freight costs - quality issues (they were always there, but perhaps got even worse with refining bottleneck) - e.g. most European refiners do not have the setup to make money off the cheapest WAF crudes etc. But I think this decomposition kind of obscures the nature of what is happening: in a "normal" market, when oil today is not too different from oil 3 weeks from now, freight is 10x lower and cracks are 4-5x lower everything is global, futures price explains absolute majority of a physical crude and product prices pretty much anywhere and curve shapes between grades are not that different. Now the market is much more fragmented: 1) there is no intertemporal substitutability (look at CFD - shifting delivery by 3 weeks can shave almost $20 from the price); this btw seems like the weirdest part of all the mess - at the end commercial inventory is not that low still, yet we keep having these bouts of crazy premiums. 2) geographical substitutability is much more limited, given how expensive freight is 3) front parts of the curve are shaped very differently - which leads to weird effects 4) quality substitutability was never there, but probably got worse.... So e.g. today's Dated Brent is $136, someone who bought a cargo loading today in a window 3 weeks ago fixed it at Dated +$15 - so will end up paying like $150, at the same time ICE Brent is $104, and you can load WTI in the Gulf below $100 - and yet there is no way to arb this massive front difference ....

THE REAL IMPLICATION OF THE AI MATH BREAKTHROUGHS I wrote about an element of AI that needs to get more discussion. The best public models will always be far behind what the labs can work with internally. Think about what this means for intelligence-intensive industries.

North Sea vs WAF headlines look really weird these days: Vitol raised bids for all (North Sea) benchmark grades to new records, surpassing previous highs in early April. vs Exxon Mobil bought Hungo from Eni at the lowest price for a WAF cargo on the Platts window in data compiled by Bloomberg going back to 2011. I guess dates / freight / grades / quality etc ... but still market looks pretty f&*ked up. ************************************************ North Sea: "Forties, FOB:Vitol bid Oct. 20-Nov. 5 at +$24.05, vs +$22.50 on Monday Ekofisk, FOB:Vitol bid Nov. 1-3 at +$21.80, vs +$20.95 on Monday Brent, FOB:Vitol bid Oct. 20-Nov. 5 at +$25.60, vs +$24.15 previously Oseberg, FOB:Vitol bid Oct. 28-Nov. 2 at +$22.45, vs +$21.55 previously Troll, FOB:Vitol bid Oct. 18-24 at +$25.90, vs +$24.45 on Monday" and on the same day: WAF: "Exxon Mobil bought 950k bbl of Angola’s Hungo from Eni at Dated -$19.60/bbl (the lowest price for a WAF cargo on the Platts window in data compiled by Bloomberg going back to 2011) for Nov. 19-20 loading: trader monitoring windowThat’s the weakest observed deal price in the window for a West African cargo in data compiled by Bloomberg starting from 2011 Cargo previously offered at -$9.90 on Oct. 2, -$2.70 on Oct. 1 TotalEnergies offered 920k bbl of Republic of the Congo’s Djeno at Dated -$23.10/bbl for Nov. 24-25 loadingThe company withdrew an offer at -$16.05 on Djeno for Nov. 10-11 loading on Oct. 5 "

🎙️ NEW PODCAST 🎧 In the latest ep of Oil Ground Up I was joined by Michelle Brouhard, head of policy and geopol risk at @Kpler, to talk about oil’s spiralling geopolitical mess, the diesel crisis, and what she really thinks about rising Hormuz oil flows youtu.be/v72t8SYw8z8?si=rFc-…

GERMANY AND OTHERS DON'T WANT SPR TO BE USED; THEY WISH TO RELEASE STOCKS ONLY FOR REAL SECURITY OF SUPPLY REASONS – SOURCES TELL POLITICO AS FRANCE FLOATS MAJOR OIL, DIESEL RELEASE IN RESPONSE TO US PRESSURE