China, not supply, holds key to oil’s next move

Oil consumer: File photo of a general view of a crude oil importing port in Qingdao, Shandong province. China is the world’s second-largest consumer of oil. – Reuters

OIL prices have fallen by about US$10 a barrel since mid-April, a decline of some 20% that qualifies as a bear market.

The technicals for oil prices are bearish, showing a trend of lower highs and lower lows, and prices well below critical moving averages. But oil producers and analysts are looking at the wrong fundamental data to explain what triggered the move lower and what will continue to drive oil prices in the near term.