Just when you thought it was safe to shoot down a Chinese spy balloon, China may just retaliate by reopening its economy and sucking down every spare barrel of oil on the earth, states Phil Flynn of PRICE Futures Group.

Ok, maybe China reopening its economy has nothing to do with the Chines spy balloon, but the reality is that as China reopens its economy, the demand growth will squeeze the global oil supply. That will have us soon forget about the recent sharp increases in US crude oil supply that in just weeks when refineries start running out, will turn into substantial draws without any SPR oil to bail the market out.

In fact, because of the underinvestment in oil and gas production that I have warned about forever and the relatively low return both from an energy standpoint and economic results, even BP tried to rebrand itself as ‘beyond petroleum’ and is now sending signals that it may have to redirect its capital back to petroleum. As their record-breaking results trailed their peers in the industry and the results of the billions, they have sunk into energy sources that went beyond petroleum and have not been able to match the efficiencies of oil and gas. The same oil and gas power the global economy needs and will improve the lives of billions around the globe.

Javir Blass at Bloomberg News pointed out, “When Bernard Looney took over as chief executive officer of BP Plc in 2020, he promised to quickly decarbonize the British oil major, cutting oil and gas production by 40% by 2030 and channeling billions of dollars into the wind and solar projects. It was a stronger version of the “Beyond Petroleum” slogan BP once used. On Tuesday, Looney altered course.

The company put out some fine words about its commitment to green energy and several billion dollars in investment to back it. But in tandem, it promised shareholders it would invest heavily in oil and gas projects. Instead of a 40% output cut, oil and gas production would fall by 25% by the end of the decade. Don’t say it out loud—because Looney took pains to emphasize that rather than reversing strategy, he was “leaning in” to it—but the new slogan is somewhat closer to “Back into Petroleum”. A rival joked that Looney’s climb-down meant BP stood for “Bitter Pill.” Hyperbolic, perhaps, but there’s a point.

Borrowing from language that ExxonMobil Corp. used last week, Looney explained his new vision in a Bloomberg TV interview: “We must invest in today’s energy system, and the reality is that today’s energy system is predominantly an oil and gas system. And that needs investment.”

China understands that and we also understand that they’re going to have to secure a lot of oil to reopen their economy. We are already seeing signs in China that travel is back to pre-Covid levels. Demand is so good that Saudi Arabia feels comfortable raising the price of oil to Asia, sending a signal that they are confident that the China reopening is going to continue along this path. That is a very bullish development and with oil double bottoming, that should be at a bottom. Reuters reported that “The International Energy Agency (IEA) expects half of this year’s global oil demand growth to come from China, the agency’s chief said on Sunday, adding that jet fuel demand was surging. Saudi Arabia, the world’s top oil exporter, raised prices for its flagship crude for Asian buyers for the first time in six months amid expectations of demand recovery, especially from China.

Operations at Turkey’s one million barrel per day (bpd) oil export terminal in Ceyhan were halted after a major earthquake hit the region. Bloomberg is reporting that Iraq hopes to resume pumping oil through Turkey on Tuesday afternoon after safety checks following two devastating earthquakes revealed no damage. “They checked the pipes and there was no damage to them or to the storage tanks,” an official from SOMO, Iraq’s state oil-marketing firm, said to Bloomberg. “The pumping could resume today. It is highly probable to resume.” Earlier on Tuesday, Turkey ordered the resumption of crude flows to the Ceyhan export terminal on the Mediterranean coast, according to an official with direct knowledge of the matter.

Perhaps the only thing that can mess things up at this point is the Fed. As long as fed chairman Jerome Powell doesn’t sound too hawkish, the reality is going to start to set in that oil prices have been focused on the short term and focused on the fact that China may not reopen its economy, are going to face the harsh reality those things are going to happen. Tonight’s inventories may show another crude oil build it may be the last that we see for some time.

US gasoline demand also seems to be exceeding expectations. Refinery demand has been weak because of refining issues but that should be solved in the coming weeks we expect to see gasoline prices after a quick dip start to rally pretty hard at the gas pump.

Reuters is reporting that “A national strike against planned pension reforms reduced France’s power supply and disrupted petrol deliveries from French refineries on Tuesday. Strikes have been taking place since mid-January as unions protest against the government’s plans to make people work longer before retirement. Public transport and schools have also been affected. The total power supply was reduced by about 4%, or 2.9 gigawatts (GW) due to decreased supply at two nuclear reactors and several thermal plants, data from power utility EDF (EDF.PA) showed.

Learn more about Phil Flynn by visiting Price Futures Group.