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How China’s Auto, Manufacturing Sector Affects Crude Oil Tankers

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China’s PMI

Markit’s manufacturing PMI (Purchasing Managers’ Index), which is an indicator of a country’s economic health, stood at 50.1 for China (MCHI) (FXI) in April 2016. It declined from March’s level of 50.2.

Even with the decline in April, the index remained above the neutral mark of 50 for the second consecutive month. China’s oil consumption, which is related to its economic activity, is a major factor driving overall crude oil demand.

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China’s automobile sales

One of the major petroleum products consumed in China is gasoline, which is impacted by the automobile industry. According to data from CAAM (China Association of Automotive Manufacturers), 2.1 million cars were sold in China in April 2016, which is a YoY (year-over-year) increase of 6.4%.

Automobile sales declined from the previous month’s 2.4 million sales. This was a 13% decline month-over-month. Combined sales were 8.6 million for the first four months, which is 6% higher than the same period last year. Higher auto sales translate to higher gasoline demand, which in turn increases crude oil demand. In 2016, auto sales are expected to increase 5%–7% due to a tax cut.

The increase in auto sales should increase the demand for crude oil, which is beneficial for tanker companies such as Frontline (FRO), Nordic American Tankers (NAT), Teekay Tankers (TNK), Euronav (EURN), DHT Holdings (DHT), and Tsakos Energy Navigation (TNP).

Now let’s look at US crude oil imports and exports and how they affect the crude oil tanker industry.

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