OPEC

If crude’s slump back to a six-year low looks bad, Bloomberg notes that it’s even worse when you reflect that summer is supposed to be peak season for oil, and “it will get more so as refiners go into maintenance.”

As we hurtle toward the absolutely critical months of September and October, the unraveling of the global financial system is beginning to accelerate.

As China takes the currency wars to the next level, so OPEC, not to be outdone, rotates the oil war volume to 11. As Bloomberg reports, OPEC pumped the most crude last month in more than three years as Iran restored output to the highest level since international sanctions were strengthened in 2012. The response - as one would expect - is a plunge in crude prices, erasing all the ridiculous algo-driven gains of yesterday, pushing WTI back on the verge of a $42 handle.

• China Rattles Markets With Yuan Devaluation (BBG)
• China Move Sparks Wave of Yuan Selling (WSJ)
• China's devaluation raises currency war fear as Greece strikes deal (Reuters)
• Protests return to Ferguson streets, state of emergency declared (Reuters)
• Heavily armed 'Oath Keepers' inject new unease to riot-hit Ferguson (Reuters)
• Greece Secures Bailout Deal After All-Night Talks in Athens (BBG)
• U.S. Identifies Insider Trading Ring With Ukraine Hackers (BBG)

Wondering why stocks are surging this morning - aside from Fischer's comments, OPEC rumors, Greek bank recaps, and JPY ignition? Perhaps it is the veritable swarm of professional technical analysts out with notes warning of significant problems ahead. From John Hussman's refined Hindenberg Omen and Carter Worth's "sell stocks, breadth is a problem," to Oppenheimer's warning of "seasonals and weak internals," and Louise Yamada's "stocks are vulnerable, keep cash on sidelines" warning - it appears today's early bounce is as much about contrarian oversold bounce as it is about any macro news. But with 73% of the largest 1000 stocks at least 5% off their highs, stocks remain fragile as they push back towards highs.

It appears that after the great collapse of 2014, oil trading "god" Andy Hall refused to learn from his mistakes, and was convinced that oil would promptly rebound up to its historic levels. He was wrong, and as Reuters reports, after two consecutive months of 3% losses in May and June at which point he was up just 2% for the year, July was by far the cruelest month in history for the oil trader, a month in which he suffered a whopping 17% loss, one which lowered his aum by $500 million to $2.8 billion.

WTI Crude is back below $45 again this morning - pressing towards 2015 and cycle lows -after Goldman Sachs' Jeffrey Currie warns 'lower for longer' is here to stay, with price risk "substantially skewed to the downside." His reasoning are manifold, as detailed below, but overarching is oversupply (Saudi Arabia has a challenge in Asia as it battles to maintain mkt share, the Russians are coming, andother OPEC members want a bigger slice) and, even more crucially, storage is running out. As Currie concludes, this time it is different. Financial metrics for the oil industry are far worse.

In an irony of ironies, Saudi Arabia is set to take advantage of the very same forgiving capital markets that have served to keep its US competition in business as persistently low oil prices and two armed conflicts look set to strain the Kingdom's finances.

Lately the leaders of some of the world’s biggest energy companies have been saying oil prices will remain depressed for some time – perhaps for the next five years – and now they’ve decided to cut their costs in the most painful way possible: massive job cuts.

In a repeat of Thursday's action, Chinese stocks which had opened about 1% lower, remained underwater for most of the session before attempting a feeble bounce which took the Shanghai Composite fractionally into the green, before the now traditional last hour action which this time failed to maintain the upward momentum and the last day of the month saw a surge in volume which dragged the market to its lows before closing roughly where it opened, -1.13% lower.  This caps the worst month for Chinese stocks since since August 2009, as the government struggles to rekindle investor interest amid a $3.5 trillion rout, one which has sent the Shanghai market lower by 15% - the biggest loss among 93 global benchmark gauges tracked by Bloomberg.

Global oil prices have returned to a state of flux. This is hardly news to any who follow the oil markets closely and yet prices continue to drive international headlines. While oil prices are notoriously difficult to predict, it has failed to deter the speculators. There are those warning that the latest dip is a precursor for $40 a barrel, a catastrophe for oil markets in some minds. On the other end of the spectrum are the optimists betting on a return to $100 by 2020. The World Bank has taken a typically middle-of-the-road approach, with forecasts of $57 a barrel in 2015. That said, given Iran’s potential revitalization, Russia’s murky outlook, and U.S. shale supply limits uncertain, prices will be responsive to supply and demand trends; at least in the short to medium term.

The U.S. E&P industry is really good at spending other people’s money to increase production. It doesn’t matter if there is a market for the oil and gas. As long as the capital keeps flowing, they will do what they do best. Don’t be distracted by the noisy chatter about savings through efficiency or re-fracking. Just look at the income statements and balance sheets from first quarter and it’s pretty clear that most companies are hemorrhaging cash at these prices. The U.S. rig count increased by 19 this week as oil prices dropped below $48 per barrel – the latest sign that the E&P industry is out of touch with reality.

Hedge Funds' net long position in WTI Crude collapsed 27% (the biggest single 'dump' in over 3 years) ahead of the big plunge last week (and is now down almost 60% in the last month - the most since 2010). Part of a broader deflationary collapse in commodities, as Bloomberg reports, long positions dropped to a two-year low while short holdings climbed 25%, erasing more than $100 billion in market value from the 61 companies in the Bloomberg E&P stock index. With crude supplies still almost 100 million barrels above the five-year average, "there's a lot more room for prices to slide," warned one trader, "it's going to take a long time for this to work itself out."

Who is the culprit for the recent record oil stock glut across the OECD nations? We present the answer on the following several charts showing oil exports from both OPEC and non-OPEC oil producing countries. Note that Iran has gone exactly nowhere - it is "others" who are to blame for the most recent downturn in oil prices.