Re: Oil-Is China Painting The Tape?

My friend from Capital One made some interesting points today in her oil missive to clients. I will tease out a couple salient points.

She believes that current “fair value” for Brent is $74 (vs. close of $66.56 today) and that the current prices implies a demand hit of 4 mmbpd from July.

Interestingly, high-frequency data for the 1st 2 weeks of August indicate global demand holding STABLE at 98.6 mmbpd MoM — even “adjusting for losses for China and RoA.”

“We still see a global inventory draw of 1.6 mmbpd through the 1st 2 weeks of August.”

Moreover, the headlines implying Chinese demand falling off a cliff due to COVID belie significant improvement in their COVID #’s over the last few weeks.

As I mentioned in this interview with @RealVision, whatever Chinese demand lost from the jet-fuel side seems to be getting offset by increased road travel which is far less energy efficient.

But imho, her most interesting points have to do with what seem like coordinated actions by the CCP to “paint the charts” bearishly now that they need to restock their inventories to get to 100+ days of demand cover (after they DEstocked at the June highs).

The timing of all those “negative Chinese credit impulse” headlines in the Twittersphere sure seems suspect in this new light.

Time will tell, but my hunch is that what is really transitory here is this headline- driven slump, which seems to be more smoke than fire.

Oops, here's the link and thread:

Re: Oil-Update on OPEC+ Agreement/Delta Worries.

Trading tactic from my old commodity trading days: offer the futures markets down aggressively and loudly on small volume while simultaneously lifting all cash desks on SIZE (who are all quoting down based on the futures puke). This is what I believe China is effectively doing.