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.
China??? sending us tanker ships of gasoline??? I never heard of such a thing. It’s a brave new world economy out there.
Maybe gasoline prices will go down
Chop-ron?
That means the price of oil and gas should crash. I’m glad I got the hell out of the industry. That’ll mean more layoffs at Schneider Electric and similar companies.
Wonder what the quality of the product is?
Could be piss water too.
I think they will go down and by December 1, prices will be at $1.40 a gallon here in the states.
Gasoline is consumed at such a rapid rate that a temporary influx is just that...even a few months maybe, but we burn it up pretty rapidly!
Already down about a dollar/gallon in a month around Jersey - this helps explain why....
Regular unleaded just broke below $2.00 a gallon here this week. $1.97.
In the $1.80’s around here this week....
It would be nice to get rid of te ethanol added to our gasoline. I can dream, can’t I?
I hope it crashes and burns for personal reasons....I have an inlaw who every time I talk with her she has to throw it in my face about her oil money, her oil land, etc...every single stinking time.....
Paid $1.89 in Sioux City today.
Just think what it would be without the Branstad Tax tacked on.
Is your real name Sue?
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The Dems can claim the low gas prices are because of Obama’s economic policy this election.
I forget. Contango is when further futures months are higher or lower? Since higher is the norm, I woudl assume lower.
Ed
Yes,
Contango = lower future prices
Normal Backwardation = higher future prices
Doesn’t bode well for oil prices stayin/going up.
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