To examine the relationship between China's economic growth and its oil consumption, production and imports, we plotted figures from BP's statistical database. We measured China's economic growth as calculated in purchasing power parity terms. Until 1993, China was a net producer of crude oil, but as consumption began accelerating the country was forced to begin importing oil. That demand acceleration came as the economy's growth ramped up from 8% to 14% between 1993 and 2000. The growth was surprising given the Asian currency crisis of the late 1990s, but demonstrated how the technology boom of that decade was powered by manufacturing in China. The tech implosion and 9/11 created a global economic contraction that was felt by China as its economic growth slumped to 4% before rebounding back to double-digit growth. With the exception of a brief slump to 9% growth in 2006, China has enjoyed double-digit growth until the global financial crisis exploded in 2008. Despite slowing growth, China's oil consumption has accelerated – both due to infrastructure investment and the start of a huge strategic oil storage program.

Taking a closer look at China's oil demand and economic growth, we can see how the country's demand has slowed along with the economy. The chart in Exhibit 11 (below) shows that the three smallest yearly oil demand increases coincided with years of serious economic downturns. However, when we look at the oil demand growth projections for 2013 and 2014 from the U.S. Energy Information Administration's (EIA) Short Term Outlook, they will rank among the lowest annual increases in the last 17 years. The key question is do the small yearly increases suggest significantly slower Chinese economic growth or does it reflect a shift in oil use?

Eoin Treacy's view China continues to represent one of the primary demand drivers for the global energy sector but is by no means the only one. India's growth can best be described as erratic but it is slowly moving up the GDP per capital tables which is consistent with higher demand growth for energy. The revolution in supply related technologies increases the possibility that the trend in global demand growth will not result in an energy crisis. In fact we believe energy prices will trend lower in real terms from later this decade.

Brent Crude returned to test the psychological $100 level and has been ranging mostly above it for the last two months. It has firmed this week and a sustained move below $100 will be required to check potential for additional higher to lateral ranging.

WTI Crude has been ranging with a mild upward bias, below $100, since September. A break in the progression of higher reaction lows, currently near $93, would be required to question potential for a successful upward break.