Worries about the global economy continue to weigh on oil. Crude fell as low as $67.35 today in a test of the post-Saudi cut lows but the bulls made a stand it rebounded to close only modestly lower.
Still, it was the second day of selling third weekly decline in the past four weeks. A larger theme that weighed this week was increasing evidence that Iran's exports are getting to market.
The idea that Iran is exporting much more than believed, and possibly near full capacity, helps to explain how global oil markets are much looser than they appear. If there's any silver lining in that for the bulls, it means that there's less spare capacity to come online if/when an Iran deal is ever reached. Also, should Trump be re-elected, the US could also return to a harder line on Iran and take some of that oil out of the market.
The key going forward is inventory drawdowns. The US SPR selling finally ends this month with no more scheduled until 2026. Combine that with summer driving season and Saudi cuts starting July 1 and the market will be in deficit in H2. But that deficit is long anticipated so it's not clear that it's going to move the needle. I suspect we would have to see some large US draws, along with aggressive China
stimulus to turn the tide.
