Setting Us Up For $200 Oil? -- May 28, 2015

This is a most interesting story coming out of Bloomberg via Rigzone today. Note the bit in bold in red:

China’s lead over the U.S. as the world’s biggest buyer of crude oil is poised to get bigger, and it’s largely thanks to teapots.

Dozens of small refiners, known as teapots to those in the industry, account for a third of the Asian nation’s processing capacity. They are now expanding as new rules will almost double the amount of crude the refiners, including Shandong Yongxin Energy Group, can import.

America, the world’s largest economy, is now the least reliant on foreign oil since 1994, while China is taking advantage of the slump in prices to expand its strategic stockpiles -- a strategy that help it overtake the U.S. as the biggest buyer last month.

The flow of oil to Asia will help create a global supply deficit by the end of the year, according to Sanford C. Bernstein Ltd.

“The expected new crude import quota for teapot refineries will help bolster China’s appetite for foreign oil,” said Gao Jian, an analyst at SCI International, a Shandong-based consultant. “Crude imports this year will exceed 2014’s level.”

China bought a record 7.4 million barrels a day in April, up almost 17 percent from March and 3.1 percent from the previous high in December, customs data show. The U.S. imported about 7.3 million barrels a day, according to government figures.

That "7.3 million" figure bought by the US is interesting. Compare that with other data points in the linked article:

The Energy Information Administration forecasts the country will import an average 6.54 million barrels a day next year, down from 6.69 million in 2015. It received 6.99 million last year.

And finally: 

China’s record purchases are adding to signs of increasing demand that will create a global shortfall of 1.5 million barrels a day in the fourth quarter, Bernstein said in a May 27 report. That will drive up Brent crude prices to $80 a barrel, the researcher predicts. The European benchmark oil closed at $62.58 on the London-based ICE Futures Europe Exchange on Thursday.

Even if Iraq was able to "flood the market with oil," a 800,000 bopd increase will hardly meet the 1.5 million bopd shortfall, and I seriously doubt Iraq can do much to increase its production of oil by as much as they say.

I also have trouble reconciling $80-oil with a global shortfall of 1.5 million bopd. If there's a 1.5 million bopd global shortfall in oil, the price of oil will go a lot higher than $80. That's my two cents worth.

In addition to increasing Chinese consumption, note the record gasoline consumption being reported in the US.