RE: Oh Dear2 Jun 2026 10:21
Hi Barnety2000, I’m going to try and answer your question. My numbers are not as polished as a Tony post, but bear with me.
As a Harbour Energy shareholder, I was very well aware that, before Gulf War III (GW3), oil prices were very depressed. What is more it was believed China was propping up the market by buying excess inventory and storing it in China. (If you don’t like buying treasuries then you can store your wealth in physical commodities – although you must build salt caverns first). The problem was - no one knew how much oil, much to my chagrin?
I think we know now. China’s economic activity is pretty much similar to before GW3 and they are consuming 5 billion a day less. Therefore, they were probably buying 5 billion and salting it away in the good times (they were paying a price of 75-65 dollars)
So, let's say the Strait of Hormuz produced 20 billion a day. We lost 12. The other 8 find alternate routes.
My estimate is that there have been 4 million barrels of demand destruction. So, a gap needs to be filled with 8 million a day. There has been surprisingly little new drilling
Yes, we have burned through much of the commercial storage, but there is still considerable Chinese storage available. Most people put Chinese storage as 1 billion barrels - I make it 1.5 billion (going in)
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In the next few months, I can see oil fluctuating between 90 and 120, but I can’t see a spike of 150. Unless China wants it to go to 150 (possible). Not my prediction in April. What do I know
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Why I laugh at JMAX conspiracy theories. Over the last 30 years the Chinese has built out its manufacturing base. It has done this using debt levels that would make America + Europe + 1980 South America blush. That debt now needs to be paid off. If there is a global recession, those investments may go south. Worse, if factories shut down for extended periods of time, it is likely they will not open.
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Forget TLW for a time, In the short-term China is being paid about $25 dollars a barrel profit on an inventory they started laying down in 2024. Yes, they may make 25 billion profits, but the more important point is the Global economy keeps ticking, and they slowly pay off their industrial build by trading. Does your portfolio speak to that reality
Trump has several more months to play with while he fulfils his promise to make China Great again.
Otherwise, TLW grinds higher. Oil up sluggish global growth keeps a lid on interest rates, making refinancing easier.
PS, very little discussion about how anemic the Baker Hughes drill rig count - considering the oil price.
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