According to Bloomberg columnist Javier Blas, China imported 1.3mb/d of Malaysian oil in December. Just taking a glimpse over BP’s 2022 Statistical Review tells us that Malaysia only produced 0.573m bbl/day of crude, however, making the leap forward in exports close to impossible. As Blas suggests, the reason behind the steep export acceleration is the rebranding of Russian, Venezuelan and Iranian oil. Zooming in on Iranian oil production, the country produced 3.62mb/day in 2021, roughly accounting for 4% of global production share. That compares against production as high as 4.4mb/day in 2008 and 6mb/day back in 1974. According to the EIA, Iran holds 12% of the world’s oil reserves, which in turn means a blind eye from a foreign policy perspective by the U.S. would allow for some resolve of the apparent energy underinvestment story. Venezuela accounts for 18.2% of the world’s total oil reserves but only produces 0.7% of global oil supply (0.654mb/day in 2021). Just as recent as 2015, the country still produced 2.86mb/day. Russia only produced slightly below 2017-2021 average at 9.88mb/day in October. Russian crude exports also remained high at 9.88mb/day. As some Russian crude may fall off the market with Iranian and Venezuelan crude supply remaining questionable in the face of sanctions, the return of China is significant. In November, China imported 11.4mb/day of crude, setting a new seasonal record. As a result, energy markets are caught in a tug of war between economic slowdown in the West and demand returning in the East. Putting numbers behind the underinvestment claim, Schlumberger’s PP&E in 2021 came in at $6.982bn compared to $6.826bn in 2020. However, we have to go back as far as 2006 to find a number lower than $8bn (2005 at $5.576bn). The lack of equipment value indicates that there aren’t enough picks & shovels around. Also indicative of production demand in the U.S., Union Pacific did note strong frack sand shipments in its quarterly report on Tuesday.
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