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A Key Indicator Low Oil Prices Are Lifting Demand

A Key Indicator Low Oil Prices Are Lifting Demand

Think there aren't any bright spots for commodities prices right now? News this week suggests you should think again.

One unexpected market in fact hit a major price milestone on Monday. Rising to its highest level in half a decade.

Oil shipping.

Platts reported that chartering prices for VLCC (very large crude carrier) ships rose to $100,000 per day on Monday. The first time rates have hit this level since 2010.

Rates are reportedly running especially high for VLCCs sailing from the Persian Gulf to East Asia. As well as for vessels chartered from West Africa, headed to Asia. Related: Where Do The Oil Majors Really Stand On Climate Change?

Sources in the industry attributed the rise to strong shipping demand out of China. With industry sources saying that requirements for crude oil in China "aren't fully met." Prompting Chinese buyers to charter more VLCCs to bring in extra shipments.

The most interesting thing about this news is it flies in the face of recent reports about an economic slowdown in China. With the pricing numbers in fact showing that Chinese oil users still need a lot of supply -- so much so, they're willing to pay top dollar to bring it in.

This development also suggests that currently-low global oil prices are lifting demand. With market sources saying strong buying interest for VLCCs is also coming from places like Japan. Related: Lithium Market Set To Explode – All Eyes Are On Nevada

This is great news for oil shippers, and a welcome development for the oil market in general. It also provides a first solid data point showing that reports of China's economic demise -- and the attendant worries about commodities markets -- may be greatly exaggerated.

Here's to hitting highs,

Dave Forest

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