CHINA SYNDROME

Unlike early May, climbing crude oil prices garnered little momentum and market participants spotted a chance to sell rather than a burgeoning rally. The decisive divide remains the view of economic recovery in the US.

Presently the consensus seems to fall on the side of skepticism about the viability of a sustainable recovery. Crude pared last week’s gains as the market looked forward to a disappointing retail sales numbers on Thursday, as well as rising unemployment claims and cooling industrial production.

Along with a declining inflation rate which is falling below Fed targets, we already have painfully slow growth, very high joblessness, and intractable financial problems, which point to the gathering deflationary spiral. The only bright spot for oil prices recently has come from China which reported record oil imports for June.

China’s net crude purchases climbed to 22.14 MM metric tons in June, beating the previous record of 20.98MM tons in April, according to preliminary data from the General Administration of Customs on July 10. Imports surged 30% percent in the first half of this year on higher demand and lower costs.

Speculative interests have reduced their net-long position in New York oil futures for a second week, CFTC data showed. Their length outnumbered short positions by 26,215 contracts in the week ended July 6 according to the Commitments of Traders report.

 

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