More bad data out of China exposes all the false mantras in last year’s epic gold (COMEX:GCJ14) collapse, the oil markets rally and the ridiculous notion that tapering is not tightening. Common sense went out the window as the divergence between stocks and commodities expanded to unheard of levels.
To think that the Federal Reserve could just taper back on bond purchases with no consequences is being proven wrong in China and other emerging market economies. The latest evidence is China’s industrial-output number and retail sales number which are even more critical in economy that is looking inward for growth. China’s factory production rose 8.6% in the two-month period from a year earlier which is the weakest start to a year since the depth of the financial crisis in 2009. Chinese retail sales did rise by 11.8% but that is the slowest pace for this time of year since 2004. After the data copper (COMEX:HGJ14) fell and Hong Kong stocks tanked. West Texas Intermediate prices already weaken by Energy Information Administration data that showed a much larger supply increase and weaker demand fell even further. Gold the most hated for the 3 quarters of the year last year is now a darling with it best starts to any year since 1983.
Yet for oil, while the economic fundamentals for demand are looking evermore dismal the geopolitical side is keeping the market from a copper like collapse. Angela Merkel is talking tough in regards to Russia but it seems to not be having an effect on Vladimir Putin’s actions. Russia says they are preparing to get used to Iran like economic sanctions so Putin’s dream of reliving the glory days of the Soviet empire will come with the bread lines and other shortages. Ash, the good old days!
Of course Russia’s invasion of the Crimea is mainly about energy. Dow Jones reports that “Crimean authorities are protecting Ukraine’s oil and gas deposits in the Black and Azov seas and would like Russian companies, including state gas monopoly giant OAO Gazprom to develop them, Crimean Parliament Speaker Vladimir Konstantinov said Thursday, Prime news agency reported. “These deposits and platforms will become fully owned by the Republic of Crimea. We are already protecting them. These are our deposits and we will fight for them,” Mr. Konstantinov said. He added that Russia should take over oil and gas production in Crimea. Mr. Konstantinov also said that all Ukrainian state property in Crimea will be taken over by Crimean authorities, which includes the state oil and gas company Chernomorneftegaz and wine production company Massandra. Crimea will have a region wide referendum on whether to secede from Ukraine and return to Russia on Sunday”
That will bring sanctions in and the question is how it will impact supply in Europe. Those fears have expanded Brent (NYMEX:QAJ14) over WTI (NYMEX:CLJ14) as the market is now shaking off the euphoria over the opening of the southern leg of the Keystone. On top of that word that the Buzzard l field, the biggest in the U.K. North Sea will undergo maintence in July is giving the longer dated Brent some support.
On top of that Cnn Is reporting that “the whereabouts of ousted Libyan Prime Minister Ali Zeidan were a mystery Wednesday after he flew out of the country the night before, despite a prosecutor’s order he not leave after his removal from office. Zeidan was in Malta late Tuesday on a refueling stop for about two hours while en route to “another European country,” Maltese Prime Minister Joseph Muscat said in televised remarks. As of Wednesday, it was unclear which country that was or if he had arrived there.