China’s February Economic Data Gauge Crude Oil Tanker Health
China’s manufacturing PMI
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The reading was well above the Reuters estimate of 51.1 and above 50 for the seventh consecutive month. A PMI reading of 50 is considered the neutral mark. A reading below 50 signifies contraction, while a reading above 50 signifies expansion. The index for China was above 50 nine times in 2016. The index gives more weight to large state-owned companies than to small private manufacturers.
Caixin Manufacturing PMI
The index that reflects the outlook of small private manufacturers is the Caixin Manufacturing PMI, which was 52.6 in February 2017 compared to 53.1 in January 2017.
China’s manufacturing activity expanded more than expected in February. According to Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group, “The Chinese economy is expected to maintain the growth momentum in the first quarter of this year. But signs of weakening may emerge from the second quarter.”
China’s economy and crude oil
China’s oil demand is closely related to its manufacturing activities. Higher manufacturing activities translate to higher demand for oil, which translates to higher demand for crude oil tankers. When crude oil demand falls, it negatively affects China’s crude oil imports and thus crude tanker companies such as Frontline (FRO), Teekay Tankers (TNK), Tsakos Energy Navigation (TNP), Nordic American Tankers (NAT), DHT Holdings (DHT), Gener8 Maritime (GNRT), Navios Maritime Midstream Partners (NAP), and Euronav (EURN).