With WTI posting its worst monthly decline since July 2015, investors should be looking at the current market as a potential buying opportunity. Recall that crude oil hit a 2016 high of $51.67 on June 9th, but has since fallen nearly 20%. Despite fears that the commodity could retest the mid-$30 range, oil market fundamentals have not significantly changed and oil is likely heading much higher in the coming months and years. The most recent data point that has negatively impacted oil prices is high Gasoline inventories, which the EIA reported are at their highest levels since at least 1990. Notably, higher oil prices have spurred more crude and refined product output, which is now worrying the market. Fuel stockpiles across the world are high as refineries have churned out large volumes of diesel, gasoline and jet fuel, squeezing refining margins as demand lagged supply. That said, the recent increase in fuel stockpiles is also somewhat seasonal as the U.S. typically loses 1.5 - 2 million b/d of crude oil demand from refiners in the summer months (likely even more due to weak refining margins). Overall, the global crude oil supply/demand picture continues to tighten (albeit a slightly slower pace than originally thought), so once refinery demand picks up again into the Fall/Winter months, WTI could still be heading to $50 by year-end. Accordingly, the current seasonal dip in the WTI price could represent a interesting buying opportunity for energy investors willing to take the risk.
A Canadian Energy expert