China releases May data
Last week, China released key economic data from May, including import data, auto sales data, and the manufacturing index. These data are crucial for assessing the outlook of the crude oil tanker industry. In April, China’s exports and imports both had come in lower than what markets were expecting. China’s manufacturing PMI (purchasing managers’ index) had also slipped in April from the previous month. After a not-so-good April, we’ll see if May’s data brought new hope to the crude tanker industry.
Why China is key to the crude oil tanker industry
As we can see in the chart above, crude oil tanker stock prices rose in 2015. The industry boomed in 2015, largely due to higher crude oil imports by China. China took advantage of lower crude oil (USO) prices and filled its strategic petroleum reserves.
China, the second largest economy in the world, is a key factor in the crude oil tanker industry. China is the second largest importer of crude oil after the United States. However, the United States doesn’t import the majority of its crude oil by sea, whereas most of China’s crude oil imports come in by sea. This makes China’s imports more important to the crude oil tanker industry. China’s imports greatly influence tanker demand and tanker rates, thus impacting 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).
China (FXI) (MCHI) is a global manufacturing hub and the largest manufacturing economy in the world. China’s oil demand is closely related to its manufacturing activities. Higher manufacturing activities translate to higher demand for oil, and higher demand for oil means higher tanker demand. In this series, we’ll look at China’s May PMI to gauge its manufacturing outlook.
China’s oil demand is also closely related to its gasoline usage. Over the years, China’s auto industry has risen to become the largest in the world. Auto demand affects gasoline demand, which impacts crude oil demand. This makes China the most important country for the crude oil tanker industry. To gauge the strength of China’s auto market, we’ll look at its May auto sales in the fourth part of this series. In the next article, we’ll discuss China’s crude oil imports in May.