China Bounce

Oil is rebounding on a drawdown in U.S. supply and strong Chinese data upping what had been weakening demand expectations out of the world’s second largest economy. Not to mention the EU most likely putting new sanctions on Russia and no cease-fire in the Gaza strip. China’s GDP came in at a better than expected 7.5% in the second quarter, above the average guess for a 7.4% increase. We saw Chinese industrial output rise 8.8% year on year in the January-June period, accelerating from an 8.7% increase in the first quarter. In June, output rose 9.2%, marking the fastest growth in the year.

Consumers in China also are showing some life and could fill their gas tanks. China retail sales also posted a 12.1% increase year on year to 12.42 trillion yuan ($2.02 trillion) in the January-June period, quickening from the 12% growth registered for the first quarter, the actual growth rate was 10.8% with inflation deducted.

Oil also got a boost on the American Petroleum Institute’s report that showed a much larger than expected 4.8 million barrel drawdown in crude oil supply. The API also showed a drop in gasoline of 1.6 million barrels and a build of 1.3 million barrels of distillates.

Geopolitical risk could rise a bit as the EU and the United States is set to impose new sanctions on Russia.

The Polar Plunge hit natural gas but natural gas prices look to be leveling off. The market has been selling the rumor of cold weather and if we don’t see a big injection in supply the bulls may come back. Summer is set to return with a vengeance.