Morning Market Overview

Oil prices end with weekly losses across the board.

The externals were a negative offsetting a slight improvement in the weekly fundamental snapshot released by the EIA. Global equities were lower with the US dollar higher as market uncertainty was elevated last week in the financial markets on concerns over inflation risk in the US as well as the impact of the tariffs that President Trump indicated he would sign for steel and aluminum.

As we have said a few times last week we think the markets have overreacted to both events.

The US Central Bank Head indicated in testimony on Thursday that the US economy is growing but is not overheated. In other words, it sounds like inflation is not a problem now. On the tariff front we believe the President is launching a shot over the bow to let the US trading partners know that trade with the US may be on a more equitable basis going forward.

The above said we anticipate volatility in the financial markets and thus also in the oil and broader commodity complex will remain at above normal levels for the short term. Market participants will have to digest the prospects for US inflation and the implications of the steel and aluminum tariffs.

Along the way oil participants will also be looking very closely at the weekly fundamental data and how that plays into the overall oil price direction in conjunction with the externals. In the latest Baker Hughes report issued on Friday the number of rigs deployed to the oil sector increased marginally on the week (by 1 rig) after increasing during the previous week. The latest rig data continues to suggest that the US oil rig count remains in an uptrend after increasing for the last six weeks in a row. Total rigs deployed to the oil sector are higher by 191 or 31.4 percent year over year.

As shown in the following chart oil rigs increased marginally with US crude oil production declining marginally last week. US crude oil production continues in an uptrend setting new record highs. Total US crude oil production is about 13.9 percent above where it was for the same week a year ago. This week’s production came in at 10.283 million bpd.