China’s oil thirst is also driving rates for VRCC hulls. That’s good news for non-captive oil tanker operators who have capacity to spare. Such capacity may get tight if the price of oil keeps dropping. Lower oil prices in the U.S. mean less domestic production here and more imports from somewhere else where production is cheaper. China’s slowdown means more than just cheaper commodity inputs for the U.S. and Europe. It means the Chinese government’s hidden subsidies to its state-sponsored resource explorers will be more costly and less effective at creating a veneer of prosperity. If China is concerned about reducing the cost of capital available to its economy, then opening its economy to more foreign investment is certainly one solution. Cost of capital is probably not the main concern of Chinese regulators; fighting fraud and making the yuan more globally fungible rank higher on the national priority list.
Full disclosure: No positions in PTR or XOM. Long FXI with covered calls.
