Greek contagion gives way to crude oil collapse

West Texas Intermediate down over 7 percent today as fears of an Iranian return to major production trump Grexit fears in volatile Monday trading action.

Jed Clampett shoots him a gusher. If Jed were living today, he probably wouldn't get enough for his find to skee-daddle off to Beverly Hills, given today's market action. (Screen grab from YouTube video of TV show opening)

WASHINGTON, July 6, 2015 – We got our expected waterfall decline this morning, as sellers crowded the markets to dump stocks wholesale, the better, apparently, to avoid Eurozone chaos and heart palpitations.

Oddly enough, however, the Dow Jones Industrials almost went positive late in the morning until another lurking event hammered stocks once again. This time, it’s our old pals the Iranians. Rumors hit the street, apparently to the effect that the feckless Obama administration was about to cave any way Iran’s mad mullahs desired in order to get a deal, any deal.

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Such an attitude is clearly politically and militarily suicidal, of course. But that doesn’t bother the clearly anti-American bias of this administration, nor does it particularly perturb the captains of industry, who probably are looking forward to re-establishing a lucrative trade with Iran’s murderous, hate-filled government.

But it does bother oil traders and investors in oil and oil-related stocks. The very prospect of a currently crippled Iran resuming full oil production and ignoring Saudi-forced production dictates frightened the bejeebers out of traders today.

Oil prices had already begun to decline. But as the lunch hour loomed, traders hit the panic button. Down went WTI, followed quickly by major and minor oil companies, gas drillers and even those darling solar stocks, given that really cheap oil will price this already heavily subsidized industry back out of the market. The decline was both breathtaking and dramatic, to the point where it took attention away from the never-ending Greek-Eurozone farce.

According to CNBC, “August crude oil futures fell -$4.45 (or -7.8 percent) to $52.48/barrel, August natural gas closed $0.06 lower at $2.76/MMBtu [British Thermal Units], RBOB Gasoline* closed -5.4 percent at $1.92/gallon, [h]eating oil futures closed -7.1 percent $1.71/gallon.”

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So much for all that “peak oil” nonsense we were being pitched just a few years back. With today’s tsunami of production around the world, particularly in the U.S. and Canada, even poor old Jed Clampett might have been stuck forever in the hills and hollers rather than decamping for Beverly Hills. No one would have made him an offer for all that “black gold,” aka “Texas tea,” that he unearthed with his trusty shotgun.

Now there’s fear that oil prices will challenge the spring lows, down in the $40 bbl. range. Who knows? But remember that the Maven confidently predicted that oil would wander around in roughly a $45-$60 bbl. range until it didn’t. You heard it first here, and we’ve been pretty much correct on this one. The only problem right now is—is this big decline, which actually started last week, going to be the mother of all declines? Or is it just a trading range thing? We report, you decide. Nobody really knows, except those creepy little trading routines embedded in high-frequency trading algorithms.

Oh, our Greek Communist friends are still in the news, of course, pushing the class struggle thing for all its worth as Commies usually do. The average Greek citizen is loving the rhetoric, too, also not a surprise, as average citizens around the world love it too, as perhaps best exemplified these days by America’s own legion of low-information voters who now know there really is a free lunch, at least under this ruinous U.S. administration. The question that neither the Greeks nor America’s low-information voters ever ask, however, is “What happens when we run out of fake money?”

Snippets of news did leak out of the Eurozone. The European Central Bank (ECB) has stated it will maintain its current level of emergency funding to Greek banks. For now. But it threatens to raise penalties for doing so.

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Meanwhile, the IMF continues to rattle its sabers since the Greek government stiffed that institution last week by defaulting on an IMF held debt. Big time. That organization curtly informed the Greeks that it can’t provide funds any longer to any country that missed payments due. What’s that about the wages of sin?

The games will continue. Stay tuned. And careful about the temptation to buy on dips this week. One false move and bigger dips could lie just around the bend.

*Yeah, the Maven had to look this one up just like you would if you had a notion. But we’re here to help, and, of course, complain.

* RBOB (sometimes spelled rBoB or RBoB) is the abbreviation for an oil industry term, “reformulated Blendstock for oxygenate Blending.” A McGraw Hill Financial publication defines this stuff as “an unfinished gasoline product that lacks an oxygenate. The oxygenate in question is always ethanol, because ethanol can not be transported in a pipeline. Ethanol is blended into RBoB at the wholesale rack terminal. A California version of RBoB is generally known as caRBoB.”

All this technical crap, of course, along with its attendant cost increases to the consumer, is brought to you by your friendly local EPA. Ethanol is so corrosive that it can’t be transported via pipeline as indicated above. So it’s blended into the current, required mix at the final moment at the refinery in a once-unnecessary process. Because of global warming climate change. We get to pay extra for the service. Politicians and their pals get rich.


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