Blame China stock slide for oil's plunge: Analyst

Perfect storm for oil?
Perfect storm for oil?   

A perfect storm of macroeconomic factors has dragged oil prices lower, but China's stock market slide kicked off this week's 10 percent plunge in crude futures, said Tamar Essner, energy analyst at Nasdaq OMX.

Traders had largely digested progress toward a deal on Iran's nuclear program and Greece's debt standoff, but a nearly 30 percent correction in Chinese stocks caught them unaware, she said Tuesday.

"I don't think the market really anticipated that things were quite as bad as they were in China," she told CNBC's "Squawk on the Street." "That had been a big tool in the arsenal of the oil bulls out there, who had said oil demand had been understated and could really surprise to the upside driven by China. That's now thrown into question."

Oil supplies in the United States and OPEC remain strong and should remain robust for the next two years, she said. At the same time, the hallmarks of the last 15 to 20 years that have supported oil prices—a weak dollar and low interest rates—are on the cusp of reversing.

Read MoreThis is the next stop for oil prices

Matt Smith, director of commodity research at Clipper Data, said the developments in China have exposed a disconnect between strong gasoline demand there and weak underlying economic data. He said the run-up in Chinese stocks has left investors feeling wealthier, but China's stock market correction stands to dampen demand.

"While we have seen SUV sales up 50 percent through May versus last year, sedan sales up 20 percent, what we're likely to see is a reversal of that gasoline demand growth, and that will only exacerbate the glut in the market potentially," he told CNBC's "Squawk Box."

Crude oil correction
Crude oil crushed on Greek, Iran worries   

While Iran could flood the market with its crude stockpiles if it reaches a deal on its nuclear program, its output would slow after the initial release, Smith said.

Negotiators from Iran and six world powers on Tuesday extended a deadline for a deal to Friday. Crude futures first broke through their two-month trading range last week after an Iranian diplomat said technical experts had completed the draft of a deal.

Morgan Stanley analysts said up to 700,000 bpd in new Iranian exports were likely to arrive by early next year, delaying the recovery in oil prices and U.S. output by six to 12 months.

Read MoreWhy you shouldn't worry about Iranian oil...yet

With the market already oversupplied with 1.5 million to 2 million barrels a day, any sign of movement toward a nuclear deal will be bearish for oil markets, Smith said. Iran could release as much as 40 million barrels of oil currently sitting in floating storage into the market, he said.

However, once it works through that stockpile, Iran will enter a gradual process of returning about 200,000 barrels per day back into the market, he said. "Even in a year's time we may not see the return to presanction levels of [about] 3.6 million barrels per day."

Smith said he expects pending reports from major oil organizations to show demand has increased as prices fall, but production, particularly from Saudi Arabia and Iraq, remains strong.