Chinese Economic Data Cools Markets, Refinery Upsets Shrugged

Risk is off to start Tuesday’s session after bad import and export data from China seems to have spooked global equity and energy markets.

Chinese exports plummeted more than 14% in July (and that’s the number they want us to believe) marking the worst slowdown since the COVID lockdowns 3.5 years ago. Imports were also down more than 12%, with oil imports from the world’s largest buyer down sharply on the month, but still higher than a year ago. So far the sharp pullback hasn’t broken the up trend built over the past 6 weeks, but both RBOB and ULSD future are within just a few cents from some weekly chart support that could be the difference in this being a brief correction vs the start of a new downward trend.   

Today’s selloff comes despite multiple refinery hiccups in the past couple of days, with at least 3 Gulf Coast area refineries reporting units taken offline, which once again shows that futures seem to be more driven by financials lately than fundamentals. It’s still unclear if the persistent heat wave is causing the rash of upsets, but it’s safe to bet that it’s not helping matters. 

Trouble brewing in the South West? The dirty little secret known as Cleaner Burning Gasoline is starting to cause trouble again for the Phoenix market, with limited supply options for the boutique grade causing rack prices to rally once again. While we’re still a far cry from the huge spreads we saw last spring, and the current refinery hiccups are less significant than the dual turnarounds that caused those shortages, it’s likely we’ll see shippers once again shun diesel to move this gasoline grade to Phoenix, which could set the stage for the next supply squeeze.

Warbitrage: You know European natural gas stocks are well supplied when, traders are having to store it in Ukraine due to full tankage elsewhere. This is just the latest example of how most forecasts last fall calling for a dire winter of 2024 due to low gas supplies (which many feared would create another diesel shortage) seem to have got it all wrong. 

Jet Fuel from ethanol? That’s the rumor, according to a Reuters report noting that ADM and P66 are discussing a JV to find new ways to turn food into fuel.

Despite a WSJ article over the weekend noting the struggle oil producers are having hiring young engineers, and the steady decline in rig counts this year, the Dallas FED’s Texas Business Outlook showed strong job growth so far this year in the oil and gas industry.  Texas continued to see job growth outpace the rest of the country in most industries, thanks in large part to the continued strong net migration into the state. That report also noted how core inflation (excluding the big drop in energy prices) remains stubbornly high in the state, which is in part due to wage growth remaining well above average levels. 

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