Crude oil prices sold off almost 5% on what many people attributed to a story that some unnamed Russian oil company source said that Russia was against a production cut. Today those sources are still unknown, but really the sell-off in oil probably had more to do with the fact that Saudi Arabia cut prices to Asia as the kingdom was losing market share to Iraq and Iran that has been raising output and taking away business from the Saudis.
Crude oil traders piled onto the downside driving oil into bear market territory in a July crude oil future expiration selloff that will be one to remember. The market is still struggling and not even the fact that we have Tropical Strom Cindy pulling into refinery row, a major political shake up in Saudi Arabia and the fact that we are already seeing shale oil producers start to feel the pain of lower oil prices seems to be helping. We also saw supportive data from the American Petroleum Institute (API) for oil but with the mood as bad as it is, it didn’t do much to elevate prices.
Gasoline demand was one of the culprits in yesterday’s crude oil demise as demand slipped, causing problems for the Fed as Fed Chair Janet Yellen says all the pieces are in place for inflation. Yet, the weakness in gasoline demand and economic data may suggest that we may be seeing some underlying softness in the economy. Now you might not think that if you look at the jobs reports and the help wanted ads but in general, the gasoline demand numbers don’t jive with a booming economy.
It was an active night for global markets, including a terror attack in Iran, the takeover of Banco Popular in Spain--not to mention the American Petroleum Institute Report that showed a big drop in crude supply but big increases in gasoline and distillates.
When will the global oil market get in balance? It already has and according to the International Energy Agency, that process is accelerating. The global oil market has achieved so-called market balance but much work remains to reduce excess global oil supply.