The Dow Jones Newswires this morning have an interesting story about Chinese oil imports, a story that should be digested by the oil trading community. DJN is reporting "China's crude-oil imports fell to a 22-month low in August as its economy slowed and refiners, facing weaker demand and steeper losses, cut throughput targets."
Weaker Chinese demand is significant, because coupled with weaker U.S. demand as we head into cooler weather, there could be an increase of inventories. Not only is cooler weather going to reduce seasonal demand in the U.S., but the highest gasoline prices ever for this time of year certainly won't spawn a sudden uptick in drivers.
While oil demand may remain weak, it could boost margins at U.S. refiners as other facilities go offline for maintenance, tightening production. This could then temporarily entice refineries at open plants to boost production, although it remains to be seen if that boost would be enough to counter other facilities with low production.
There have been numerous stories that caution me, however. Oil traders seem to believe that there is a high possibility of oil prices keeping their support in the $90s, and many traders believe oil could rally even further. While I tend to disagree, going against the grain in this manner does bring with it concerns. Thanks to experience, I feel the market hasn't adequately weighed the situation, and is bullish when the mood should be more somber. I can't see how fundamentals would support fall/winter oil prices over $100 per barrel, unless we see something new and significant hit the press.
In the meanwhile, I'll remained concerned that oil prices are rising even against a backdrop of stories like the DJN reported this morning that seem to point to weaker fundamentals than the market expects.