RE:RE:RE:Second Half CapexYour views are what makes a market.
China has indeed recently been importing more than they are using. This is likely going into domestic storage.
President Xi gave a directive to his goverment to prepare for worst case senarios. A worse case oil senario for China would be an oil embargo. They need 15-16 million barrels per day, and only produce about 4, so are dependant on imports for 10+ million barrels per day.
That may or may not come to be, but when preparing for worse case senarios, you assume it will happen, so plan accordingly. That means increasing domestic inventories.
No other Country is that exposed to oil exports.
From the May China oil import data, it appears they brought in about 1 million barrels per day extra - ie increased their SPR by 30 million barrels. If that is the strategy they are following, it will take many months before would stop. For example, an increase of 300 million barrels to their SPR would take about 10 months.
I agree that China could go a long while buying 1 million less if they want to. I give that a low probability because it would be counter to Xi's directive.
Given the US saber rattling over Taiwan, and the US Navy's ability to interfer with oil tanker deliveries to China, I assign a high probability to China continuing to buy more than they need (ie as much as they can without driving up the price).
Yes the March EIA 914 showed almost 12.7 million barrels. I use about a 3 month average delay from drilling to production for US unconventional. That 12.7 million barrels is about 3 months after US oil rigs peaked at about 630. They have fallen since, and are now down to about 550. That is a 12% drop.
Those 630 rigs (plus a bit of Gulf of Mexico addition) managed to add about 300k/day over and above the massive natural declines from prior wells.
The question now is what can 550 rigs do? We won't know for about 3 months (and another 2 months to see the 914 report)
Can 550 rigs hold production flat (ie produce enough new oil to replace declines), or not
The US longer horizontals tend to come on at higher rates, then decline faster.
That 12.7 million production in March means even more declines to replace later in the year. And less drilling rigs are in place to do so. The probability of net decline looks high to me.
The longer oil stays in its current range, more the US rig count is likely to decline. Declining rigs, and increased production declines = equals less production.
Time will tell. Its all about probabilities. The probabilities look favorable to me.