Japan growth misses the mark as its GDP came in at a disappointing 2.6%. The trade was looking for a 3.6% reading and the big miss probably means that Japan will continue on its massive stimulus effort. Bloomberg reports "The report adds to the debate on whether Japan is strong enough to sustain a planned 3 percentage point bump in the sales tax in April, with Prime Minister Shinzo Abe deciding in coming months on whether to proceed. While consumers continue to propel Japan's rebound, companies have yet to commit to the Abenomics project, paring capital spending for a sixth straight quarter.
This comes after oil (NYMEX:CLU13) rejected breaking out to the downside on the heels of terror threats to oil out of Yemen and embassy closings as well as strong data out of China. This reversed oil and brought back the entire petroleum complex and broke oil’s five-day losing streak. Oil supply in the U.S. has been falling as refiners reacted to strong margins and flexed their new hard won refining capacity.
My buddy Trilby Lundberg of the Lundberg survey reported that the average price for regular gasoline at U.S. pumps fell 7.61 cents in the past two weeks to $3.5985 a gallon. The survey polls 2,500 gas stations across the country and according to her data gas price hit its year-to-date peak of $3.795 Feb. 22, is 9.22 cents below the year-earlier price of $3.6907 a gallon. We might wonder if prices will fall further in the aftermath of the EPA blinking on RINS. The extension helped RBOB futures retreat and now the market can focus on the glut of supply. Of course regional issues could keep prices elevated in the Midwest.
The Energy Information Administration is reporting on another milestone in the U.S. gas and oil shale revolution. The EIA's August 2013 Short-Term Energy Outlook forecasts that China's net oil imports will exceed those of the United States by October 2013 on a monthly basis and by 2014 on an annual basis, making China the largest importer of oil in the world. The imminent emergence of China as the world's largest net oil importer has been driven by steady growth in Chinese demand, increased oil production in the United States, and a flat level of demand for oil in the U.S. market. U.S. total annual oil production is expected to rise by 28% between 2011 and 2014 to nearly 13 million barrels per day, primarily from shale oil, tight oil, and Gulf of Mexico deepwater plays. In the meantime, Chinese production increases at a much lower rate (6% over this period) and is forecast to be just a third of U.S. production in 2014.
On the demand side, China's liquid fuels use is expected to grow by 13% between 2011 and 2014 to more than 11 million barrels per day while U.S. demand hovers close to 18.7 million barrels per day, well below the peak U.S. consumption level of 20.8 million barrels per day in 2005. Looking beyond 2014, higher U.S. oil production and stagnant or declining U.S. oil consumption, coupled with China's projected strong oil demand growth and slow oil production growth, suggest that once China replaces the United States as the world's largest net oil importer, the gap between net oil imports in China and the United States will grow. There are several different ways to measure oil import dependence. Discrepancies in the way dependence is assessed arise because oil is imported as crude oil but consumed as refined products, of which crude oil is the main but not only input.
Net oil imports reflect the broadest measure of liquid fuels and include the following elements in the volumes of oil liquids produced and used within national borders: Crude oil, lease condensates, natural gas liquids, biofuels, other liquids and refinery processing gain, which in the United States has been roughly 1 million barrels per day in recent years.
Another common (and narrower) measure of oil import dependence is the ratio of net imported crude oil to net crude oil inputs to refineries. The United States has emerged as a significant net exporter of petroleum products in recent years and a portion of U.S. crude oil imports is used to produce products not consumed domestically. The advent of China as the world's largest importer based on the narrower measure occurs on a different schedule than for the broader one, but the basic trends and drivers remain the same as for the broader measure. However, imports of crude oil alone do not automatically imply domestic dependence on foreign supplies.
Gold is on a tear as well. Bloomberg News reports that "Gold consumption in China, the world's largest user after India, jumped 54% in the first half of 2013, putting the country on track to become the top bullion consumer at a time when demand is contracting elsewhere. Consumption reached 706.36 metric tons in the first six months, the China Gold Association said today in an e-mailed report." They also reported that "Gold premiums in India, the world's largest consumer last year, may extend their advance to a record as central bank restrictions halt imports.
The fees paid by jewelers to banks and other suppliers have jumped to about $40 an ounce over the London cash price from $30 in the week ended Aug. 2, said Haresh Soni, chairman of the All India Gems & Jewelry Trade Federation. Premiums may surge to $100 if the government doesn't ease the rules, said Bachhraj Bamalwa, a director at the federation, which represents about 300,000 jewelers and bullion dealers.