Markets Pullback on Negative News from China
January 4, 2023
The energy markets have seen a very strong pullback from recent highs and today the market is lower again putting us back to level just before the Christmas Holiday break. Pundits were calling bad China news the catalysts for the downside. China’s official manufacturing PMI index was down to 47.0 for December, which is the lowest level since February 2020. A number below 50 indicates contracting in manufacturing. China’s government also raised export quotas for refined oil products starting in 2023, which is most likely due to expected lower domestic oil demand due to COVID-19.
The news from the IMF of 1/3 of the world in recession was also bad news for oil demand and helped the sell off.
The SPR reported that 2.7 million barrels of oil were released and that means 177.6 million barrels of the 180 million barrels of oil have been released. There are only 2.4 million barrels to go, and this could mean the start of some draws to crude oil inventory in the next few weeks.
A Bloomberg survey reported yesterday that OPEC production in December was up 150,000 bpd last month. OPEC total output is at 29.14 million bpd well below their current quota.