China Bumps
Oil prices are falling on renewed fever about Asian growth and talk of rising OPEC oil supply. Oil prices started to weaken after the China Caixin manufacturing PMI fell to 49.4 last month from then March reading of 49. That was the14th consecutive month of contraction and it also fell short of market expectations. On top of that, we have reports showing that we are going to see more oil production out of Saudi Arabia, Iran and the North Sea adding to supply when there are concerns about demand.
Those demand fears were exasperated when the International Monetary Fund warned that while Asia remains the most dynamic part of the global economy, it is still facing severe headwinds from a still weak global recovery, slowing global trade, and the short-term impact of China's growth transition. Even in Japan the International Energy Agency says the combination of China’s rebalancing and larger spillovers from its financial markets were a risk to economic growth in Asia.
We also saw reports that struggling North Sea production increased, hitting a 4 month high. We also saw Iranian Oil Minister Bijan Zanganeh brag that Iran had quadrupled its oil exports to the world's fifth-largest importer of crude, sending Seoul 400,000 barrels a day in April, up from 100,000 barrels before economic sanctions were lifted in January.
From the supportive side, the dollar is still getting hit hard falling to an one month low. Weakness in the dollar should bode well for oil and other commodities.
AAA says that gas prices should rise at the retail level another 8 to 10 cents a gallon. Triple A cites record gasoline demand and believes gas prices could peak in June like they did last year.