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Leaked info says no gas imports to China next month

Posted August 26, 2008

"China stockpiled too much gas and diesel before the Olympics. And now it doesn’t need to buy any for the next month or maybe more. Yep, kids, demand just crashed through the floor." — Stephanie Grimmett

by Stephanie Grimmett

Baltimore — (TFN): And just when you thought the reawakening of the Russian bear (think grizzly, not teddy) was going to halt the decent of crude oil prices, information leaks from two of China’s largest oil traders are telling a different story.

China stockpiled too much gas and diesel before the Olympics. And now it doesn’t need to buy any for the next month or maybe more.

Yep, kids, demand just crashed through the floor. That greedy little tiger (well, if Russia’s a bear… ) known as Chinese energy demand is full, satisfied and will be sleeping off it’s post-Olympics hangover for at least the next month or two.

According to Bloomberg, a source at China National United Oil Corporation (Chinaoil) told inquiring minds that his (or her) company won’t be interested in gas imports for the upcoming month and maybe for October, as well.

Not to be outdone, another source, this one at China International United Petroleum & Chemical Corporation (Unipec), the country’s top oil trader, is saying the company didn’t buy diesel for August and it won’t buy any in September, either.

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Possibly in response (what is this, a snitching contest?) an unamed Chinaoil employee said that it’s August deisel purchases will show a severe reduction from its July numbers.

And now everything looks much clearer. China boosted its government-mandated price on gas by 18% in mid-June. At the time, foreign governments, especially the U.S., UK and EU, thought the gas price hike was actually a reaction to the pressure they were putting on China’s government.

But they were wrong. I don’t think the Chinese even noticed that pressure, which involved a bunch of government heads complaining to the world in general that China’s price controls were preventing the natural reaction of supply and demand in the oil markets (if the Chinese didn’t have to pay exorbidant prices for gas, the way Americans did, they wouldn’t curb their usage the way Americans did, by a whole 3%).

Turns out, China just raised the price to encourage oil refiners in the country to produce more gas in preparation for the Olympics. And the plan worked… a little too well.

The Chinese now have a glut of gas and diesel and still don’t care how much foreign governments pressure them. Saudi Arabia can whine all it wants about how China’s not buying any of its oil. China’s still not paying for gas it doesn’t need. So there.

What’s bad for crude oil prices, though, is good for oil refiners. I bet Hot Stock Confidential members are glad they have that nice little refinery stock in their portfolio right now. It’s the perfect way to profit from China’s decision to abstain from gas trading for the next month. If you’re not an HSC member, but wish you were, learn how easy it is to become one in this free special report.

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Posted by Stephanie Grimmett · Filed Under Oil and Energy 

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