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China’s PMI Fell below 50: What That Means to Crude Oil Tankers

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China’s May PMI

In May 2017, China’s manufacturing PMI (Purchasing Managers’ Index) was 51.2, which was higher than the expectation of 51.0. It remained constant from the previous month when it fell after a nine-month consecutive rise. The PMI is an indicator of a country’s economic health.

China’s PMI is above 50 for the tenth consecutive month. A PMI of 50 is considered neutral. A reading below 50 signifies a contraction, while a reading above 50 signifies expansion. In 2016, China’s PMI was above 50 nine times. The index gives more weight to large state-owned companies than to small private manufacturers.

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May Caixin PMI

The Caixin Manufacturing PMI reflects the outlook for small private manufacturers. It fell to 49.6 in May 2017 compared to 50.3 in April. The fall was the first in 11 months.

China’s oil demand

China’s oil demand is closely related to its manufacturing activities. Higher or lower manufacturing activities translate to higher or lower demand for oil, which translates to higher or lower demand for crude oil tankers. When crude oil demand increases, it increases oil imports, which positively impacts crude oil tankers. Some of the major crude oil tanker companies are Frontline (FRO), Nordic American Tankers (NAT), Teekay Tankers (TNK), Tsakos Energy Navigation (TNP), DHT Holdings (DHT), Gener8 Maritime (GNRT), Navios Maritime Midstream Partners (NAP), and Euronav (EURN).

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