Posted on 07/13/2016 8:07:54 PM PDT by dennisw
Just over a month ago, when we pointed out that that the gasoline curve was about to shift from contango into backwardation, we said that the gasoline tanker armada off the coast of Singapore was about to start offloading as it would soon become uneconomical to hold product in offshore storage. This meant one thing: China was about to unleash a wave of accelerated gasoline exports across the entire world.
We pointed out the unprecedented surge in Chinese gasoline stocks...
and added that as China continues to imports tremendous amounts of both crude and product, far greater than actual demand, this would send "China's gasoline stocks to even higher record levels. In other words, the global glut is now not only at the crude and distillate level, but also in global gasoline stocks."
One month later we find out that this was a correct assessment of the situation.
According to the WSJ, while initially China’s demand for oil helped soak up some of the surplus crude sloshing around the world, China is no longer the handy excess supply "buffer" it once was and as a result China's teapot refiners are now flooding markets with products including diesel and gasoline, in the latest example of how surging Chinese exports are shaking the commodities industry.
China’s total exports of refined fuels jumped 38% on-year to 4.2 million tons, or roughly 1.02 million barrels a day, in June, according to the latest data released Wednesday by the customs administration. Its refined fuel exports are up 45% overall so far this year. Much of the surge is attributable to a leap in China’s shipments of diesel. In May, China’s exports of the fuel mainly used in heavy industry had quadrupled on-year to 1.5 million tons; detailed data for June is due later this month.
The sharp rise is merely a confirmation of what many have said all along: in its relentless bailouts of all enterprises, the Chinese government is unleashing a deflationary wave around the globe, which forces Chine to dump its products to any and every buying around the globe, in the process massively undercutting prices. This mirrors similar increases in China’s exports of processed basic materials like steel in recent months, a trend that has provoked anguished complaints from governments and industry bodies across the world.
Worse, what many thought was stable Chinese domestic demand, ended up being just the filling of every possible container, not to mention the now almost full SPR, in lieu of actual domestic commodity demand. As such, China's sagging demand as the economy slows once more has left the country’s oil and metal refiners with huge surpluses they are increasingly looking to sell abroad.
It can bite the shorts, just like backwardation at a market top can bite the longs.
There is so much disbelief in the rally in oil from its February lows.
That said, I have been closing some of my energy bull positions.
I would bet that China starts selling off it’s hoard of strategic metals it’s been buying and hoarding for years.
Destabilizing the world seems to be the goal.
Well they do pronounce it weefinewee.
That was my first thought/fear as well. Of course, as a patriotic American, I'd like to see gasoline at 75 cents a gallon, but that will never happen, I'm sure.
or stockpiling for war, or both.
you can bet its going to be a poor grade of gummy gasoline.
Those energy jobs are high paying jobs. Stupid to be outsourcing those. The Left are ignorant fools.
That make sense.
I was pretty decent at making money. Terrible at keeping it so I stopped.
Realized at 48 I’m a degenerate trader lol.
I’ve made 500 percent overnight (in soy bean once), and you knwo that’s possible, and I gave it ALL back. Like a degenerate gambler.
Excellent.
I am using E85. Burns clean and is far more detonation resistant than pump gasoline. Which means you can use higher compression ratios and/or crank up the boost pressure. You can make a ton of power on the cheap as compared to racing gas. The down side is ya need a lot of the stuff, about 1.33 time the gasoline you would burn for the same power.
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