Iran, China and Crude.

I hit the brakes when I saw this headline:

China may need to export car surplus

While China is by no means the only large consumer of crude oil, the country’s growth trends have been reason enough to be bullish. We’re told the demand for automobiles and the Western lifestyle will mean higher crude oil prices. But the above headline suggests two things:

1) The Chinese are not demanding as many autos as had been expected.

2) The Chinese automakers have simply overproduced, similar to other manufacturing excess throughout the country driven by government stimulus and investment trends.

Or it could suggest some combination of both. Either way, this is something worth watching as China’s growth trends lower.

Other numbers to keep in mind: Chinese crude oil production and Chinese crude oil imports.

Monthly importsof crude have jumped to test all-time highs

This is the kind of chart the bulls salivate over. But it’s not quite as impressive when you see that monthly Chineseproductionhas notably declined:

Note that China is already the largest buyer or Iranian oil. If Iran defies the sanctions, it will mean they need to sell more oil to Asia. But does China, in particular, want to increase their dependence on Iranian oil as their domestic consumption slumps. If they want to be a major world player, they may look at this a bit more diplomatically and think twice about increased business with Iran in the face of new, tougher sanctions. [Remember: US Treasury Secretary Timothy Geithner went to Beijing this week to discuss China’s relationship with Iran, among other things.]

So even if Iran is able to sell more oil to China and Asia, it’ll likely mean they sell that oil at a significant discount; or they sell less of it because China’s growth slump equates to less demand. Either way, it seems like revenues from Iranian oil exports are bound to shrink. I’m not sure they can handle that. All together this could mean some of the geopolitical premium could escape from the current price of oil.

But, while we’re talking about crude oil’s price drivers, we can’t forget about the potential impact of a QE3 from the Federal Reserve. We don’t know if or when the Fed may take action. And we don’t even know if it will have the same impact on risk assets as rounds 1 and 2 had.