China’s GDP hit the lowest level since 2012 yet was actually in line with market expectations give or take. The slowdown in China has taken its toll on precious metals yet oil is still strong on geo-political risk. Fear that Ukraine could erupt into civil war is overshadowing a big surge in U.S. oil supply based on data from the American Petroleum Institute. The shale oil boom is flooding the country with very high quality pure oil that has to be mixed with lower quality oils so the refiners can refine it. In fact the shale oil is so pure that according to some source does not have to be cracked and just tweaked a bit to be a usable fuel. The energy world is changing quickly but not fast enough to cool off prices just yet.
China's Gross Domestic Product grew 7.4% in the first quarter year-on-year, down from 7.7% in the previous quarter confirming fears that China’s economy is on a downward slope. Trying to avoid a hard landing may be more difficult especially when their recent boom depending on a lot of hot money that has cooled as the U.S. works towards normalizing monetary policy.
The situation in the Ukraine continues to support oil. Russian incursions into Ukraine raising fears of escalation even after Ukraine regained control of a rebel held airport. Ukraine says there were no casualties yet the possibility of a Russian invasion or a civil war is still possible.
That overshadowed a massive increase in crude supply at least according to the American Petroleum Institute. The API reported a whopping 7.6 million barrel build as imports increased by 186,000 barrels per day. Cushing stocks fell by 640,000 barrels as oil moved through the Keystone XL down to the Gulf. Refining runs kicked up 0.2 to 88.1%. Gas stocks fell by 449,000 barrels and distillates by 1.1 million barrels.
The race is on to refill natural gas storage. This week we should see a 33 bcf injection. Yet with more winter cold injection the season is getting off to a slow start. We better see producers really kick it into high gear if we are going to keep this market from spiking.
Gold (COMEX:GCK14) is trying to stabilize after the World Gold Council said that China’s record demand for Gold last year will stay steady. The market was looking for China to hoard more as their economy looks increasingly shaky.
Grains are rocking again as demand for soybeans (CBOT:SK14) and a frost in the Plains is increasing wheat (CBOT:WK14) prices not to mention a risk premium coming out of Ukraine. The Soy crush crushed the bears as soybeans hit an eight-month high as the United States crushed 153.84 million bushel of beans in March, much higher than the 144.6 million bushels anticipated. Frost in the Plains is reducing the spring wheat crop by estimates of 10% to 12 %. Corn (CBOT:CK14) farmers can’t get in the fields that are covered with snow.