China Still The Main Driver Of Oil Prices

Rumors that China’s GDP and demand for oil are increasing continue to take oil prices up, even if they turn out not to be true.

The madness over a Chinese economic recovery grows by the day. The central government claims that its $585 billion stimulus package kept the nation’s GDP moving up 7% in the second quarter. China economic statistics have been criticized as unreliable, so it will never be known whether the March to June period was quite that good.

The Chinese stock market hit a 13-month high recently. The reason for that could be the traders are sold on a solid recovery. But, the increase could also be based on the huge amount of money that the government is putting into banks and businesses to create “artificial” GDP improvement. One side effect of that could be bubbles in the real estate and equities market, which will contribute to inflation in the next quarter or two.

Whether the Chinese recovery is an illusion or not, oil moved above $60 again on hope of hyper-growth in the world’s most populous nation. According to Reuters, “There’s evidence that Asia, led by China, is turning around quite quickly,” said David Moore, a commodity strategist at Commonwealth Bank of Australia in Sydney.

Maybe.

Douglas A. McIntyre