Oil prices are on the rise again as the International Energy Agency is the latest forecaster to increase their expectations for China oil demand. Yet the IEA went far beyond just increasing demand expectations for China they said that the demand growth that we have seen so far is astonishing. The IEA beat all the other forecasters by predicting that world demand will increase by 70,000 barrels a day to 86.6 million barrels or close to 1.6 million barrels more than a year ago. Yet what have captured the imagination of the marketplace were their comments that Chinese demand surged by an astonishing, 28 percent year-on-year in January. That led to the IEA astonishing forecast for a growth in China demand to increase by 130,000 barrels a day to 9 million barrels a day, representing an increase of 6.2 percent from 2009.
Of course at the same despite all of these rising demand expectations are China on an unsustainable path? First it was the Department of Energy, then it was the OPEC cartel and now it is the International Energy Agency. Yet this demand growth is not without risks both political and economic and the White House may be raising the stakes and the pressure on the Chinese to let some air out of this risky China bubble and adding to tensions.
China's economy is leading to a global recovery but also is adding to tension between China and the Obama administration. Yesterday the Obama administration promised a mini-cabinet to focus on imports. He also called on the Chinese to embrace a market-oriented exchange rate policy .President Obama also said he would start to enforce existing trade deals but what made the Chinese mad was that was the currency comment.
Long story short (due to computer issues) The Chinese bubble may the biggest threat to the global economic recovery.