Reading China
Oil traders have long been accustomed to reading the tea leaves for clues to the true state of fuel consumption in China, but even the savviest analysts are being tested this year by a befuddling mix of signals.
An unexpected second month of weak crude oil imports reported on Monday gave fresh vigor to the bears, who read it as a signal that refiners had overestimated demand; bulls are still enraptured by surging diesel and gasoline imports, which they say may continue as industries resume operations after the Olympics.
Both could be wrong.
With major new refiners being started toward the end of this year, China’s crude oil import growth should accelerate but its massive products stockpiling will slow, cutting fuel imports.
Between the rapidly shifting trade flows and the lack of transparency around inventory levels, which were built up substantially ahead of the Olympic games this month, traders will be hard pressed to determine whether a U.S.-spawned economic slowdown is finally taking the wind out of China’s sails.
That’s a key question for oil markets that have risen sixfold in as many years, driven in large part by burgeoning Asian demand.
Some closest to the pump say the day has already arrived, nearly two months after Beijing surprised the nation with a near 18 percent rise in subsidized gasoline and diesel prices.
“Demand is definitely coming off after the price hike bad credit payday loans. Among the worst hit is the transportation sector, which had been operating on razor-thin margins even before the increase,” said Qi Fang, a long-time independent dealer who owns a dozen petrol stations in Hebei province, near Beijing.