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Greatly Exaggerated. The Energy Report 12/10/19


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Once again the death of Chinese oil demand has been greatly exaggerated. Oil prices paused on U.S.-China trade concerns as well as potential interest rate direction from the Federal Reserve that meets on Wednesday. Yet one must wonder how tight the global oil markets might get if there is indeed a U.S.-China trade deal because already Chinese oil demand is shattering records.

Reuters reports that the growth rate of Chinese crude oil imports reached a record 11.13 million barrels per day in November and are up 10.5% for the first 11 months of the year compared to the same period last year, customs data showed on Monday. This flies in the face of the bearish arguments that we had heard that the U.S.-China trade war would destroy Chinese oil demand. What is more is the fact that the OPEC plus alliance is committed to keeping global oil supply restrained leaving the global oil demand cover the tightest it has been in years.

The pressure on China to make a deal should be rising especially if you look at their Consumer Inflation Data released last night. MarketWatch reported that, “China’s consumer inflation accelerated further in November to its highest level in nearly eight years, driven by soaring prices of pork and other food items. The consumer-price index rose 4.5% in November from a year earlier, matching a pace recorded in January 2012, data from the National Bureau of Statistics showed Tuesday. The key inflation reading was higher than a 3.8% rise in October and beat a median forecast of a 4.4% increase by economists in a Wall Street Journal poll.

China’s food prices in October grew 19.1% from a year earlier, the fastest pace in more than 11 years, after climbing 15.5% in October. Pork prices soared 110.2% a year in November, breaking the record made in October as an outbreak of African swine fever continued to cut the hog population and drive pork prices higher. Pork prices alone lifted headline CPI by 2.64 percentage points in November. Meanwhile, the increase in China pork prices on a monthly basis eased to 3.8% in November, down 16.3 percentage points from a month earlier. Prices for other meat consumed as pork alternatives rose between 11.8% to 25.7% on year in November, the statistics bureau said.

In addition to that or perhaps because of it, China is making good on some Phase one grain purchases. Soybeans moved higher after Reuters reported that Chinese soy importers on Monday bought at least five bulk cargo shipments of U.S. soybeans, or about 300,000 tonnes, for shipment in January and February after Beijing offered the buyers at least 1 million tonnes in new tariff waivers, U.S. exporters said. The fresh allotment of tariff waivers, which exempts importers from 30% tariffs on U.S. shipments, comes after buyers used up nearly all of the 10 million tonnes in waivers awarded by Beijing in October, the traders said. On top of that, we get the December WASDE report, and so far the market is not expecting any major changes from the last report. So stay tuned.

In crude oil, we get the American Petroleum Institute (API) report tonight. Private forecasters are seeing supplies continuing to slip at the Cushing, Oklahoma delivery point, and there are growing expectations for a crude oil draw.
Thanks,
Phil Flynn

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About the author


Mr. Flynn is one of the world's leading energy market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets.

Phil Flynn's accurate and timely forecasts have come to be in great demand by industry and media worldwide. His impressive career goes back almost three decades, gaining attention with his market calls as writer of “The Energy Report”.

He is a daily contributor to Fox Business Network where he provides daily market updates and analysis. Phil’s daily commentary is also featured in Futures Magazine, International Business Times, Inside Futures, 312 Energy, Enercast, among many others.

Phil is a lifelong resident of Illinois. He attended Daley College in Chicago before beginning his career on the trading floor of the Chicago Mercantile Exchange which eventually led him and his team to The PRICE Futures Group.

Media highlights include: The President of the United States, Bloomberg, ABC, CBS, NBC´s "Today Show" and "Nightly News with Tom Brokaw", CNBC, CNN/CNNfn, FOX´s "O´Reilly Factor", PBS´s "The Newshour with Jim Lehrer" and "Nightly Business Report", MSNBC´s "The News with Brian Williams", The Wall Street Journal, Business Week, Investor´s Business Daily, The New York Times, The Los Angeles Times, Chicago Tribune, Associated Press, The Toronto Globe & Mail, Houston Chronicle, Futures Magazine, Inside Futures, and National Public Radio.

Contact Phil Flynn: (800) 769-7021 or at pflynn@pricegroup.com

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