Well that was sure an interesting week for oil prices.

Between the unravelling situation in Greece and its debt problems, the stock bubble bursting in China, the ongoing price influence and speculation about the Iranian nuclear negotiations, it was hard to come up for air, let alone figure what was going on in the world. So like any good Calgarian faced with a barrage of uncertainty, I went to the Stampede with my kids to clear my head, go on some rides, eat some food I shouldn’t and get some perspective.

So… Sure there’s a lot of noise going on, but have things changed? Is the situation in Greece the harbinger of doom for the euro that many speculate (hope) or is it the latest in the painful restructuring of an economy that borrowed way beyond its means? Is the meltdown in equity markets in China a leading indicator of pending economic ruin or is it the typical end of an over-inflated market that had risen more than 100% in the year prior to this past month’s collapse? And what about Iran and the prospect of up to 1 million barrels of oil hitting the market? Where will it all go? How much do they have in storage? How can we possibly step out of the moment and see the bigger picture?

Typically, by going back to basics. The debt situation in Greece is nothing new, but the galvanizing vote spurred a run to the US $, pushing oil prices down. The China market crash is pretty spectacular but shouldn’t be confused with a demand indicator and as it regards Iran, sure there is the potential for added barrels but by and large the market price already reflects that potential.

So the real crux for the oil market has been and will continue to be the difference between supply and demand (or historic glut, if you are a reporter) and how it is going to resolve itself.

So is there anything new on this front that is worth looking at that is neither speculative nor media-hyped? Well of course there is. And for this week, there are two that we will look at. Both demand based. For the forst item, the chart to the right shows that demand for liquids was up significantly in June, bringing the gap between supply and demand back to about 2 million barrels or about where we were when this all got serious in October of last year. Sure supply is up as well, but the rate of growth in supply is slowing.

In another demand related item, EIA data show that US demand for gasoline is surging and staying at levels not seen since their peak in 2007. Demand was 9.5 million barrels per day for the last month, and inventories of finished product have been drawn down by about 25 million barrels. As the summer driving season hits, traffic is up as Americans hit the road with cheap gas and bigger vehicles (as SUV sales surge as well).

So what to make of this? Much like my trip to Stampede, it’s crowded, it’s noisy. The people are often annoying and unpredictable. The signs are hard to figure out. It’s hot. The food is generally bad for you and the rides appear to defy any reasonable application of engineering and the carnies are pretty scary. There are likely a few points during the day where you want to give up and just sit on the ground and whimper. But ultimately, you start at one end, work your way to the other end and make it safely back to where you started. And realize that when it’s all said and done, you actually had a successful day – and made it through in one piece.

Much like the oil market, it’s messy – but the system works.

Prices as at July 10, 2015 (July 2, 2015) *Note that markets were closed on Friday July 3 for US Independence Day

• WTI Crude: $52.72 ($55.52)
• Nymex Gas: $2.774 ($2.770)
• US/Canadian Dollar: $0.7876 ($ 0.7953)

Highlights

• It was an ugly week as the price of oil fell due to a number of factors including the unfolding fiscal crisis in Greece and a series of negative news items for supply and production
  • Storage posted a small increase
  • Production increased marginally during the week while OPEC production numbers continue to grow.
  • Traders continue to await the much anticipated production drop-off in the US
  • The rig count registered a small bounce back.
• Natural gas rallied but ended relatively flat on the week on the basis of lower storage injections
• As of July 3, 2015, US natural gas in storage was 2688 billion cubic feet (Bcf), which is 2% above the 5-year average and about 33% higher than last year’s level, following an implied net injection of 91 Bcf during the report week. Overall U.S. gas consumption decreased by 1.8% this week, with a decrease in power-sector consumption of 4.9% leading the way.
• As at July 3, 2015, US Crude oil supplies were at 465.8 million barrels, an increase of 0.4 million barrels from the previous week and 83.2 million barrels ahead of last year.
• The number of days oil supply in storage was 28.3, ahead of last year’s 24.1.
• Production increased to 9.604 million barrels per day from 9.585, as a slight decrease in the lower 48 was offset by higher Alaska prodiction
• Oil rig count at July 10 was up to 645 from 640 the week prior.
• Natural gas rigs drilling in the United States fell this past week to 217 from 219.
• As of July 6, the Canadian rig count was up to 155 (20% utilization), 106 Alberta (20%), 14 BC (17%), 32 Saskatchewan (25%), 3 Manitoba (17%)). Utilization for the same week last year was 39%.

Drillbits

• Speculation is growing that Canada was in a technical recession during the first half of 2015, prompting further speculation that the Bank of Canada will cut interest rates once more
• Bonterra closed a private placement for $31 million
• Kelt closed a $90 million equity offering
• Prairie Sky closed a bought deal for $198 million
• For the first half of 2015, Canadian oil and gas companies raised almost as much capital as they did in the first half of 2014 when prices were above $100