While crude oil trader's talk about the current oil glut, oil and gas demand continues to surprise to the upside. The latest surprise comes from the latest International Energy Agency reports, which once again says that the agency is being caught by surprise by stronger than expected demand.
Many oil companies had trimmed their budgets heading into 2015 to deal with lower oil prices. But the rebound in April and May to $60 per barrel from the mid-$40s suggested that the severe drop was merely temporary.
Crude oil prices are modestly higher for the second day in a row after a mildly bullish API oil inventory report release late yesterday. The gains in oil are primarily driven by short covering after a significant decline in prices that began in mid-June.
With the recently concluded nuclear deal between Iran and the P5+1 countries, oil prices have already started heading downward on sentiments that Iran's crude oil supply would further contribute to the already rising global supply glut. The economic crisis in Greece, OPEC's high production levels and China's market turmoil have created more pressure on oil prices, making a price rebound lookhighly unlikely in the near future.
Yesterday’s expiration of the August Nymex WTI contract was mostly uneventful with the market trading in a relatively tight trading range. So far this morning the market is on the defensive after the API reporting a surprise build in total U.S. crude oil stocks.
Oil prices fell more than 3% on Monday after Greece rejected debt bailout terms and China rolled out emergency measures to support its stock markets, adding to concerns about demand at a time of global oversupply.