Oil and China

Oil is what is driving the currency market; because of its rise commodity currencies such as the dollar have been pummeled. The dollars small appreciation yesterday was attributed to the PRC raising gas prices 18%. Now that traders slept on the news they have began to think simple supply demand analysis the situation has changed. Sinopec and other Chinese oil companies are forced to sell gasoline at a loss. The current increase will give the companies an incentive to produce more gasoline. Whether you like it or not demand from China will continue unabated in the near future. Not price increases or oil’s rise will even dent the rise of the Chinese consumer. China may go from the world’s manufacturer to the world’s consumer. It is expected they contain 20% of the Earth’s human population, only natural that they should spend at least equal to 300 million Americans. Has oil hit its peak NO, has the dollar reversed its slide, NO.

As a currency trader this information should net you profits, because when you saw the dollars short appreciation you hopefully went long on EURUSD. If not there’s still time it’s still below 1.58 resistance and might break through next time it tests those waters. The slow down in America has not reined in the unthinkable $140 a barrel price. Don’t expect it to either because America is already very oil efficient as a ratio to GDP. On the other hand those Mao era monstrosities in the Tianjin province burn ridiculous amounts of oil per ton of steel produced. Do the Chinese care, not really they still have over 300 million people living on a dollar a day. China needs jobs, jobs, and more jobs they care little in regards to the price of commodities. In short the recent gas price increase will free state run companies to produce more at a smaller loss perhaps even a profit. So Oil at $150 definitely a possibly even if the Fed funds rate hits 5%. The demand for Oil has another facet the Chinese consumer.