Oil bears have been selling on so called weak demand but that is rapidly changing. U.S. gasoline demand is at record highs and demand in Europe and China is surging. Reuters News is reporting that China is on pace to overtake the United States as the world's biggest oil importer this year, cementing its status as Asia's most pivotal oil market actor that will increasingly dominate the region's fuel trade. For the first time, China imported more crude oil in the first half of the year than the U.S., government statistics showed. China averaged 8.55 million barrels per day (bpd) versus 8.12 million bpd in the United States, a trend that is expected to last.
China refinery demand is a key driver and they are exporting oil products making China a major refining hub. That has grabbed the attention of Saudi Arabia that is cutting a deal with China. Fox Business Network reports that state-owned oil giant Saudi Arabian Oil Co. is in talks to invest billions of dollars in a Chinese state-owned oil refinery, according to people familiar with the matter. The deal, which could be valued at up to $2 billion, would give Saudi Aramco a more-than 30% stake in a 260,000-barrels-a-day plant owned by PetroChina Co. in China's Yunnan province, the people said. PetroChina is a unit of state-owned China National Petroleum Corp. Saudi Arabia could supply some of the refinery's crude needs. Aramco might also buy some of PetroChina's retail assets, it was reported. If the talks succeed, they would finally bring to fruition plans that Aramco and PetroChina have been discussing for several years.
So, while oil struggles at 50 the fundamentals are in play to still see higher prices long term. Don’t let one fallen idol shake you out of your position. Obviously, you must trade with your own risk capital and within your means but the fundamentals of falling supply and rising demand always has led to higher prices. Shale oil may bounce back but it won’t be until prices are high enough to get confidence back in the sector. And that's assuming they have not ruined all the wells.