Striking the right balance.
Oil prices dove early as the Shanghai Stock Market dropped hard striking a blow deep into the heart of expected oil demand growth. Despite the winning ways of the U.S. stock market, oil traders are increasingly focused on Asia which has had a rough go as of late. The Shanghai stock index fell 6% driving down Hong Kong and giving rise to the dollar as traders start to look for safe haven in what may be a challenging week.
Last week China raised red flags for the commodity bulls as they seemed to suggest they would cut back on bank lending in coming months, essentially removing some of the unprecedented stimulus they have added to the Chinese economies. Not only that, they said they were studying ways to reduce over capacity in commodity consuming industries lowering oil demand expectations. The market is concerned whether or not the Chinese government can engineer a soft landing. How will the futures markets react as they start to remove this historic stimulus.
Now you cannot blame the Japanese elections for the sell-off as Japan's stock index rose to an 11 month high. This came after the previous night's historic victory by the opposition Democratic party of Japan.
Phil Flynn is senior energy analyst for PFGBest Research and a Fox Business Network contributor. He can be reached at (800) 935-6487 or firstname.lastname@example.org.