Morning Market Overview

Prices are mixed as we head into the third day of the week. In pre-API inventory trading and after the EIA released the latest Short-Term Energy Outlook (STEO) report yesterday the entire complex remained on the defensive. The complex received a bit of help from the externals as equities although lower in most locations around the globe did recover in the US market, but the US dollar traded slightly higher on the day… both overall negatives for oil prices. The STEO was neutral to bearish as it projected total US crude oil production hitting at least 11 million bpd in 2018 setting new record highs along the journey while only raising demand slightly compared to the last report.

On a positive note it did forecast OECD inventory levels well below the five-year range high throughout the entire forecast period. This was the most supportive inventory forecast in a long time and one that OPEC should eye with a bit of accomplishment if the actual inventory levels are in sync with the latest projection. On Tuesday the API started the weekly inventory report cycle started with a mixed inventory snapshot.

Crude oil and gasoline showed surprise draws in inventory versus a market expectation for a build. Distillate fuel inventories built versus an expectation for a modest draw. The total combined inventories of crude oil and products were modestly higher on the week. Overall the market recovered some of the day’s losses after the report was issued. On the financial front global equity markets were lower around the world except for the US markets which staged a light comeback. The Index still decreased with the US market trading higher through most of Tuesday’s trading session. The EMI Index decreased by 0.68 percent with the year to date gain now at 2.2 percent.

Only four of the ten bourses in the Index are still in positive territory for 2018. London is in the worst performing spot in the Index with Brazil in the top spot with an 9.2 percent gain for the year. The lower value direction in global equity markets is a negative price driver for the oil complex.