The risk of further supply disruption remains elevated

The unease across financial markets has intensified the oil markets recent sell-off

Indeed, it's tough constructing a bullish argument amidst a constant stream of news flows pointing to a worsening global outlook as tariffs present a significant threat to US growth and in turn the health of the Global economy.  And to complicate matters, even if OPEC extends their supply compliance, given the burgeoning non-OPEC supply conditions as evidenced in the latest US inventory reports, OPEC + will face a scabrous task balancing the current supply with the demand side of the equations.

I'm shocked the considerable supply tail risk following tanker attacks faded quickly, so it's back to the markets seemingly endless preoccupation with US-China trade and the outlook for global oil demand.

Waning risk appetite on the back of the omnipresent threat of trade war escalation continues to sully the landscape but from my chair, its weighed on oil price to an astonishing degree. Especially given that the impact on oil demand from higher tariffs is virtually impossible to quantify over the near term.  But with the level of unease increasing across financial markets which continues spreading like wildfire, even the most ardent oil bulls might consider heading for the sideline until the dust settles.

But for me, there is an opportunity at every turn, especially with the Middle East dust-up providing us with a stark reminder of how quickly things can escalate in this politically fractured part of the world.

 Here is what this lonely  Oil bull is looking at

 While monthly reports from the EIA and OPEC this week both revised down estimates for 2019 global oil demand on global growth concerns, they also forecasted an undersupplied conditions his year, with OPEC expected to continue producing at a level below what would be needed to balance the market.

The OPEC meeting looms large as it's expected to resolve the critical issue of whether OPEC+ will extend the production cut agreement into 2H19. The conference is planned for June 25-26, but Saudi Arabia and Russia are reportedly seeking a delay into early July to allow June supply/demand data to be considered before a final decision is made. It also makes sense as the panel will be able to judge better the fallout from the crucial G-20 leader's summit and whether President Trump will follow through with more tariffs.

I was rewarded handsomely last week after reversing my short below WTI $51(as per Thursday market note) by the unexpected escalation in Middle East tension. But the reason I remain a buyer on overextended dips is I continue to believe that demand risks are more than sufficiently priced into oil now, especially the prompt contracts while supply risks are not. With the US administration pointing the finger at Iran for recent tanker attacks and going against both the news and market flow, I believe the risk of further supply disruption remains elevated and should provide a credible backstop for Brent and WTI.