Is The China Stimulus Enough To Boost Oil Demand?

If you looked at oil prices today, you would have no idea that China announced a historic monetary stimulus package yesterday. And while I am on the bull side regarding the oil market, I view the latest monetary stimulus as insufficient to buoy demand higher. On the surface, risk assets (especially Chinese tech stocks) are getting a lift from the China stimulus announcement, but I think for there to be a meaningful push higher in "real" demand, the government will have to do more. The good news is that this is a step in the right direction. The bad news is that it's not enough.

Why China matters...

When it comes to analyzing the global oil market, China is it. This is especially the case on the demand side. I think this chart from IEA perfectly illustrates why that is the case.

Source: IEA

Since 2013, China has been a key demand driver for the global oil market. With implied oil demand now sitting at ~16 million b/d, it is the 2nd largest oil-consuming nation and the number 1 crude importer. So when China sneezes, the oil market catches a cold.