Morning Market Overview

Oil prices are continuing to trade higher this morning on short covering. Monday oil prices rebounded strongly following the lead of a recovery in most global equity markets and a declining US dollar versus most major currencies.

The short-term direction of oil prices has been primarily driven by the direction of the external markets (equities and the US dollar) for the last three weeks or so. Oil market participants have not been taking their cue from the fundamentals which remain supportive. Most all asset market classes have been impacted by the uncertainty emanating from talks of a possible trade war between the US and China as well as a view that inflation risk is rising.

As we have said several times we view the talk of tariffs to be a negotiating stance of both the US and China while inflation is only slowly evolving as evidenced by Friday’s underperformance in the monthly US new jobs number. This week the market will be getting a large dose of oil fundamental data. In addition to the weekly inventory reports from both the API and EIA the three main oil reporting agencies will release their monthly oil forecasts.

The EIA leads the group releasing their Short-Term Energy Outlook tomorrow mid-day followed by the OPEC forecasts on Thursday morning and finally the IEA projection hitting the media airwaves early Friday morning.

Market participants will be looking at the monthly forecasts very closely to see if the global inventory destocking pattern is projected to remain in place as well as when global stocks will hit the five-year average. As discussed US stocks are just about at the five-year level already