On Monday, we noted with some incredulity that North Dakota Sour - a high-sulfur grade of crude - was briefly going for -$0.50 at the Koch brothers' Flint Hills Resources refining arm.

That’s not a misprint. If you had yourself some North Dakota Sour, you’d have to pay a refinery to take it off your hands. Your product was worth less than nothing.

We use the past tense there because once Bloomberg broke the story, Flint Hills quickly replaced the negative number with a positive one - you can now get $1.50.

Negative oil prices - even if they merely reflect the increased cost of transporting certain grades - underscore just how acute the downturn has become in the face of a global deflationary supply glut created by the Saudis, perpetuated by ZIRP, and exacerbated by the incipient threat of Iran’s return to market.

Now, with crude having dipped below $30 (today’s rebound notwithstanding) the question on everyone’s mind is simply this: can oil continue to move lower? According to the IEA, the answer is “an emphatic yes.”

In its latest oil market report, the agency warns that the world could “drown in oversupply” with the return of Iranian crude. "If Iran can move quickly to offer its oil under attractive terms, there may be more ‘pricing in’ to come,” the agency’s monthly report says. “While the pace of stock building eases in the second half of the year as supply from non-OPEC producers falls, unless something changes, the oil market could drown in over- supply.”

To be sure, the IEA isn’t convinced the Iranians will be able to meet their own targets for production increases. While Tehran is aiming for an immediate increase of 500,000 b/d, the IEA says the number is more likely to be in the neighborhood of 300,000 b/d in Q1 and 600,000 b/d my mid-year. Iran is shooting for a 1 million b/d increase by year end. Still, that's enough additional production to offset falling supply from non-OPEC producers.

The current downturn is attributable to “weak market fundamentals, expectations for and lifting of Iranian sanctions, stronger USD after Fed rate hike, weak economic numbers, and turmoil in financial markets", the agency continues, adding that Saudi Arabia’s move to cut subsidies is likely to weigh on domestic demand. Here are the summary bullets courtesy of Bloomberg who notes that "with OPEC supply potentially expanding and demand growth slowing, global inventories could accumulate by a further 285 million in 2016 after swelling by 1 billion barrels last year":

• Rout may deepen as mkt drowns in supply, Iran returns


• Yes, Iran’s return can help drive price lower, IEA says


• Iran’s return intensifying battle for Europe mkt


• OPEC Dec. output drops 90k b/d, led by Saudis, Iraq: IEA


• Tank tops to be tested; China to add 145m bbls capacity


• Floating storage crude diminishes slowly; bottlenecks ease


• Warm winter weighed on OECD demand in 4Q


• Europe refinery margins seen rebounding in Jan.


• Saudi subsidy cut to damp kingdom’s oil demand


• IEA revises 2016 world oil demand fcast to 95.7m b/d from 95.8m b/d in monthly oil report; 2015 world demand revised to 94.5m from 94.6m b/d


• Demand growth to slow to 1.2m b/d in 2016 vs 1.7m b/d in 2015


• Non-OPEC supply seen falling 600k b/d in 2016


• Est. for call on OPEC crude, incl. Indonesia, revised down 300k b/d to 31.7 m b/d


• OPEC production in Dec. fell by 90k b/d to 32.28m b/d


• Iran return to intl mkt may add 300k b/d by end 1Q

Despite some optimism around Chinese oil demand (which apparently is all the market needs to fuel a 5% Brent rally), the demand growth story is "faltering," to quote Goldman. Here's a look across markets:

Meanwhile, supply is resilient:

And inventories are overflowing:

So despite today's China-driven relief rally, the fundamentals suggest a sustained move higher is essentially out of the question and from a medium-term perspective, any impact on prices from a slowdown in non-OPEC supply will be immediately offset by stepped up Iranian production. 

Ultimately then, the Wells Fargos and Citis of the world are going to need a lot of rope when it comes to how long they can avoid marking their energy loan books to market because the rebound they need to avoid dramatic hikes in loan loss reserves isn't coming any time soon. 

As for the Saudis, check back in 11 months to find out whether Riyadh's 13% budget deficit forecast turns out to have been far too optimistic.