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Chinese oil demand is reportedly almost back to pre-coronavirus crisis levels

  
  Analysis
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Bloomberg reports on the matter

The report says that Chinese oil demand is all but back to levels last seen before nationwide lockdown measures were imposed to curb the spread of the coronavirus outbreak, according to people with inside knowledge of the country’s energy industry.

Adding that consumption of gasoline and diesel has fully recovered as factories reopen and commuters drive rather than use public transport.
The exact level of oil demand in real time – according to executives and traders who monitor the country’s consumption – is said to be about 13 million bpd, which is just shy of the 13.4 million bpd seen around May 2019 and the 13.7 million bpd seen in December 2019.
For some context, the apparent drop in Chinese oil demand was seen at around 20%:
However true the figures are from this report, it is certainly giving hope to oil bulls that the market can recover from the severe imbalance – and perhaps more quickly than thought – that we are seeing currently. WTI crude is now up by over 8% on the day to $31.85.

China is to start buying oil for state reserves after sharp drop in prices – report

  
  Analysis
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Bloomberg reports, citing people with knowledge of the matter

Bloomberg reports, citing people with knowledge of the matter

The report says that China is moving forward with plans to buy up oil for its emergency reserves after the epic crash in oil prices over the past few weeks.

Adding that Beijing has asked departments to quickly begin filling tanks and options to lock in the current low prices in the market. Also noting that Beijing may use commercial space for storage as well – in addition to its state-owned reserves.
I don’t think this comes as much of a surprise as China is the biggest crude oil importer in the world, and there has been so much speculation of them doing this already. There were even reports on this as far as three weeks back as seen here at the time.
But at least with China stepping in, it may help to briefly support prices somewhat in the near-term but don’t expect this to change the grand scheme of things.

China refineries reportedly processing 25% less oil than they were last year

  
  Analysis
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Bloomberg reports on the matter

The report highlights that Chinese refineries are cutting back on output even further to cope with weak demand and a lack of workers due to the coronavirus outbreak.

Throughput is now reported to be 25% below the average in 2H 2019 and the low run rates are expected to last through February at the very least. The run rates have fallen to just about 10 mil bpd this week – the lowest since 2014.

China oil
That certainly won’t give oil bulls much encouragement and this is another warning sign to overseas oil suppliers to China surely.
This headline alone may not be one that impacts the market too heavily but just note that all of these things add up when you weigh up the potential impact of that the coronavirus outbreak is having on the global economy.

Will China GDP matter more to assets than any US-China deal?

  
  Analysis
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Via Bloomberg

China
The title of this post was a good question on Bloomberg’s Markets live blog at the end of last week. Mark Cranfield phrased the question as follows:

China’s 3Q GDP is due Oct 18 and it could be the first time on record that it prints below 6%. That could have a greater long-term impact on assets than a partial trade deal. Especially, as Bloomberg Economics expect policy makers to step up stimulus in response to stabilise the mainland economy.

If so, will that make China equities an asset class that become less correlated to the direction of Wall Street and global stocks? Would it trigger an asset swicth away from China bonds that spills over to other fixed income markets?

My assessment is that Firstly.  China’s GDP growth is going to be slowing due to reasons of growth. It is not the norm for developed countries to have double digit growth in the GDP. As China joins those developed nations it is only normal that GDP slows in pace.
Secondly, on a more general note, I think that the US-China deal matters more than the GDP figures. No deal – bad GDP would have been the worst outcome. With the US and China together making up 40% of the world’s GDP and the US on it own about 25% a good deal between those two countries should ultimately put positivity back into asset classes. It feels like the disaster outcome has avoided for now.
What is your take on it?

Asset Managers With $74 Trillion on Brink of Historic Shakeout

  
  Analysis
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This is quite amazing via Bloomberg:

“The industry that gave rise to investing titans Peter Lynch, Bill Miller and Bill Gross is facing an existential crisis.

For years, mom-and-pop investors frustrated by high fees and subpar returns from big-name money managers have been shifting their savings into ultra-cheap funds that simply mimic the returns generated by benchmark stock and bond indexes. Passive investing, as it is known, was in. Active was out.

At first, few noticed the trickle of money out of funds run by star money managers into cheaper index products. But now, no one can ignore the flood. The exodus from active funds has sent fees inexorably lower, led to the loss of thousands of jobs and forced large-scale consolidation among firms. That’s pushing the industry, with $74 trillion in assets as measured by Boston Consulting Group, towards a shakeout where only the strongest will survive.”

 

The graphic tells the story:

Wall Street Makes It Hard to Earn Legal Living

  
Analysis, Education
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Schroeder_lg_lgAlice Schroeder is the author of “The Snowball: Warren Buffett and the Business of Life”, a former managing director at Morgan Stanley, and is a Bloomberg News columnist. Below is a great opinion piece she wrote for Bloomberg.
Read more here:
A group of university students I spoke to recently asked if it was possible to make a living on Wall Street without compromising your values. I had to tell them no.
Wall Street has many decent, honorable people, but they work in a system that fundamentally compromises people’s ethics. The high pay is like an anesthetic that numbs you from feeling how you are being corrupted. Not only that, many honest people who work there would agree with an even more extreme statement: It’s hard to make a living legally on Wall Street. (more…)

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