Here’s a quick assessment of oil market conditions.

Oil prices, as shown below, have dropped over 40%, year-to-date (YTD) as both supply and demand curves are shifting.

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Our next chart illustrates the current oil market fundamentals.

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Where are inventory levels at?

Inventories remain at all-time highs.  See top right-hand side chart.

What about rig counts?

Oil prices have fallen 40% YTD and, in response, the number of oil rigs has collapsed. The entire post-2008, so-called, U.S. energy renaissance has been undone. See top left-hand side chart.

What about current supply and demand conditions?

Production (supply) is slowing but still exceeds 11 million barrels per day. Consumption (demand) has recovered a bit but still remains at early 1990’s level. See bottom two charts.

If we ignore the current positive price momentum and focus only on fundamentals, the oil outlook looks “precarious” based on the combination of this information.