Morning Market Overview

The modest support seen in yesterday’s market seems to be waning this morning. Oil prices were able to work their way into the positive side of the equation by the end of the day Tuesday. As we have been discussing for the last few days the market is now focused on the fundamentals as OPEC did what they had to do with the short and medium-term direction of oil prices now mostly getting their signals from the plethora of fundamental data that hits the media airwaves.

Market participants will be looking for any signs that global inventories remain in a destocking pattern and are working their way toward the so-called normal historical level or the five-year average. In addition, the market will be looking very closely at how US shale oil production evolves in the coming months and if global oil demand growth will be able to absorb US production growth. Ahead of the API inventory report oil prices were modestly higher across the board with refined product prices leading the way higher resulting in the crack spreads widening on the day even with most analysts projecting a draw in crude oil and builds in both distillate and gasoline stocks.

The pre-inventory report gains were not very strong but enough to keep the complex in the slowly evolving uptrend it has been in since the middle of the year. On the financial front, global equity markets were mostly lower Tuesday. The Index traded lower with the US markets in negative territory throughout the US trading session. The EMI Index decreased by 0.16 percent with the year to date gain hovering around 18.5 percent. All ten bourses in the Index remain in positive territory for 2017. London is in the worst performing spot in the Index with Hong Kong still in the top spot with a 31.1 percent gain for the year.

The lower value direction in global equity markets yesterday was a negative price driver for the oil complex. On the currency front, the US dollar Index was higher for the day with the Yen/USD and the Euro/USD lower. Overall the currency markets were a negative price driver for the oil complex.