Don't panic, nothing has really changed in the oil markets

Monday's 8% WTI crude decline is setting up a big opportunity for buyers. And there could be more to come. But this is driven by momentum, not by the fundamental conditions in the physical market.

To the point:

Demand is heading towards record levels both internationally and in the U.S.

The Greek issue is not new and it has not changed. It is just popular now as deadlines are pushed. It will fade and its drag on oil prices will ease.

The Chinese stock market is either correcting or crashing depending on who you listen to but to put it into perspective, the Shanghai Composite Index is off 25% over the last month after a 115% run to the upside over the last eight. Our NASDAQ is flirting now with zero growth for the year. We're still upright. Not that all things are apples and apples but the Shanghai Index is still doing quite well on a relative basis. Oil consumption is unlikely to change based on short term momentum one way or the other here.

The dollar will go where it's going to go and its influence will be strong, but stronger yet will be a balanced crude market which we are approaching.

Should the West come to an understanding with the Iranian government, the 20 to 40 million barrels of Iranian oil in storage will be sopped up quickly in a global market of 93 +/- mm barrels of oil per day (BOPD). No one has a real gauge on this oil and no one seems to know how much actually remains in storage. The extra million BOPD we're reading about is not immediate. This will take time and investment. Adding it to the current world supply straight away is not an accurate assessment, though it does fit into the mindset of the market. Perception is steering the bus, not reality.

North Dakota, the number 2 oil producer in the U.S., saw a 30,000 BOPD decline in April over March numbers. This is a real number reported by the state, not an estimate. And bear in mind that April up north is a lot friendlier to pumpers than March. Never underestimate the effects of weather on oil production. If there are any weak points in your facilities, you'll find them in the cold months.

The EIA production estimates will be revised downward. They have to be. Two months of inventory draws with one weekly increase is a trend in its infancy. Production and inventory cannot be divergent for long.

"More efficient rigs," a concept advanced in the financial news, is a misnomer. Lately operators have been running more sand due to discounting being offered by midcontinent mines. They have also made some adjustments in fluid chemistry that is helping to lower frack costs. But there is nothing more efficient or much different than a well that is fracked today than from one that was fracked at $100 oil a year ago. Four years ago there was, but not one year ago.

A 12 rig increase after 6 months of declines is chicken scratch. A few operators who had leases to hold, or testing to be done, likely waited until county and township roads stiffened up then brought rigs in. It's nothing. If it increases by 200 in a short period of time, you can call me wrong and you'll be right. But after a 60% drop in the count, even 200 new rigs won't come close to balancing the scales.

What has changed with oil in July is the level of patience in the financial markets. This market is a lot like raising kids. Some come home with a paycheck faster than others. But they all will eventually if the fundamentals are there.