WTI Crude (Sept 16) futures are within a hair of trading with a $40 handle - something that has not happened since the lows after the failed Doha talks in April. From the June highs at almost $53, oil is down 22% - a bear market -as inventories, rig counts, and production all rise.

The rally is over...

And while production is up in the US (along with rig counts and inventories), JPMorgan notes the global picture is not helping...

Overnight in Asia, weekly inventory data was reported in Singapore, with a build in both light and middle distillates stocks to 15,326kbbls (13,860kbbls last week) and 13,194kbbls (12,192kbbls last week), respectively. Last week’s data has been restated and now shows builds (+905kbbls in middle distillates and +327kbbls in light distillates) versus draws (-304kbbls in middle distillates and -610kbbls in light distillates) reported last week.

Middle distillate stocks are approaching the upper end of the 5-year range, while light distillate (i.e. gasoline) stocks are trending well above the 5-year highs after recent builds (see charts below). Also this morning, European (ARA) weekly inventory data reported a draw in both gasoline and gasoil inventories to 1,284ktonnes (1,354ktonnes last week) and 3,236ktonnes (3,381ktonnes last week), respectively. ARA gasoil stocks are at the high end of the five-year range (5-year average 2,523ktonnes), while gasoline stocks are still well above the 5- year seasonal range (5-year average 786ktonnes).

"We’re going to test support around $40," said Kyle Cooper, director of research at IAF Advisors and Ion Energy in Houston. "Crude inventories are building. There’s still more supply than demand."

This won't end well...