No Greek Rally For Oil

Despite the market getting what appeared to be its desired result from Greece's election this weekend, riskier assets, including oil, had a tough go of things on Monday. NYMEX-traded crude for July delivery lost 76 cents to close at $83.27. In London, Brent crude fell $1.56 to $96.05 per barrel. Thanks to a supportive weather forecast, natural gas futures surged nearly 7%. That helped the United States Natural Gas Fund (NYSE: UNG) to a gain of 6.6% on volume that was about two-thirds above the daily average. With the Greek elections behind the market and most investors convinced the result means the country will remain part of the Euro Zone, traders have once again turned their attention to Spain. Yields on Spanish bonds soared once again today, indicating that investors have returned to the business of fretting about Spain's tattered financial system.

Neither Spain nor Greece are particularly large oil consumers, but the inability of global financial markets to rally on what appear to be good news for Greece is perhaps indicative of additional near-term downside for oil. Overall, the Euro Zone accounts for 17% of global oil demand and with few prospects for robust economic growth there over the next two years, oil bulls are forced to rely on the U.S. and China to drive demand.

Those are dangerous cards to play because U.S. oil inventories remain elevated and China appears to be struggling to engineer an economic soft landing.

On a lethargic day for U.S. equities, oil services stocks were drilled, no pun intended. The Market Vectors Oil Services ETF (NYSE: OIH) fell 1% after Raymond James analyst J. Marshall Adkins downgraded 10 services names, including National Oilwell Varco (NYSE: NOV). Adkins expects the number of active U.S. land-based rigs to fall by 500, or roughly 25 percent, from now until the end of 2013, Bloomberg News reported.

Halliburton (NYSE: HAL), Baker Hughes (NYSE: BHI) and National Oilwell Varco all finished lower by more 1%. Among the integrated plays, Exxon Mobil (NYSE: XOM) lost just 0.13%, but Chevron dropped 0.83%. The recent slide in major energy stocks now has the Energy Select Sector SPDR (NYSE: XLE) trading at a valuation that makes the ETF appear far cheaper than the comparable utilities fund.

Looking at some of the more controversial energy names, Petrobras (NYSE: PBR) had a decent day, gaining 2.7%, but Chesapeake Energy (NYSE: CHK) slid 2.4% despite the huge jump in natural gas futures. Chesapeake is the second-largest U.S. producer of that fuel behind Exxon Mobil.