As U.S. economy sputters, China’s importance to oil producers grows

(Calgary Herald)

ou could sense some angst last week in the United States and Japan when China overtook the latter as the world’s second largest economy.

No one who follows the numbers was really surprised, because the momentum to pull China into second place was inevitable, the only question was, when? Surprise was also muted among those who follow the energy business, because creating wealth and guzzling fuel go hand-in-hand. Remember, only a few weeks ago China officially nudged ahead of Japan in total energy consumption, so the Middle Kingdom was effectively guaranteed a silver medal for economic growth too.

So what? Economy and energy aren’t the Olympic Games. A coach’s lecture that “Second place is first place for losers,” would seem inappropriate when talking about consumption. But in fact there is some validity to playing down second place. Markets, like sports commentators, still have a strong affinity for first place institutions. All of which is to say that when it comes to crude oil consumption the United States is still in first place by a wide margin, and what happens there is still most influential to global oil prices.

A yellow flag has been dropped in the oil arena. US inventories of crude oil, heating oil, diesel fuel, and gasoline have reached record or near-record levels in the United States. The volumes are trending up and when inventories get too high price is the first thing that’s taken hostage (as anyone in the natural gas business knows all too well.)

Read more: http://www.calgaryherald.com/business/economy+sputters+China+importance+producers+grows/3431538/story.html?cid=megadrop_story#ixzz0xdB3swNb