China Demand Slows
Today the crude oil market is likely to temporarily shift its focus to outside market fundamentals associated with the pace of the US economy last month. However, there is an emerging bearish storyline this week that Chinese energy demand is slowing and that is given significant credence by the fact that Chinese August waterborne oil imports declined by 5.4%. Another negative force for crude oil prices is seen from news that diesel/jet fuel supplies are so overwhelming in many areas that refinery activity is likely to remain very low which in turn reduces the consumption of crude oil.
On one hand, the natural gas market continues to hold up above $2.40 as if that is credible support, but we think the market lacks fundamental justification to continue to hold a large portion of the last 2 months rally. In fact, US temperature forecast have turned more bearish in our view with much above normal temperature areas reduced to a very small sector of the country and no visible tropical storm threat on the horizon.
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