Monday's 8% WTI crude decline is setting up a big opportunity for buyers. And there could be more to come. But this is driven by momentum, not by the fundamental conditions in the physical market.
To the point:
Demand is heading towards record levels both internationally and in the United States.
The Greek issue is not new and it has not changed. It is just popular now as deadlines are pushed. It will fade and its drag on oil prices will ease.
The Chinese stock market is either correcting or crashing depending on who you listen to but to put it into perspective, the Shanghai Composite Index is off 25 percent over the last month after a 115% run to the upside over the last eight. Our NASDAQ is flirting now with zero growth for the year.
We're still upright. Not that all things are apples and apples but the Shanghai Index is still doing quite well on a relative basis. Oil consumption is unlikely to change based on short term momentum one way or the other here.
The dollar will go where it's going to go and its influence will be strong, but stronger yet will be a balanced crude market which we are approaching.
Should the West come to an understanding with the Iranian government, the 20 to 40 million barrels of Iranian oil in storage will be sopped up quickly in a global market of 93 +/- mm barrels of oil per day (BOPD).
No one has a real gauge on this oil and no one seems to know how much actually remains in storage. The extra million BOPD we're reading about is not immediate. This will take time and investment.
Adding it to the current world supply straight away is not an accurate assessment, though it does fit into the mindset of the market. Perception is steering the bus, not reality.
North Dakota, the number 2 oil producer in the U.S., saw a 30,000 BOPD decline in April over March numbers. This is a real number reported by the state, not an estimate.