Market Report & Analysis for 5/28/2018 Morning Edition

Morning Market Overview

As the week starts to wind down ahead of the long US holiday weekend oil prices were hit with another round of selling for the third session in a row. This week’s fundamental snapshot released by the EIA on Wednesday was bearish with total combined stocks increasing. In addition, the comments that OPEC members may replenish potential supply lost from new Iranian sanctions and/or due to further deterioration in Venezuelan oil production as their economy seems to be spiraling out of control added to the negativity Thursday.

The spot Brent and WTI contracts are now off the highs hit early in the week. However, prices remain significantly above the lows hit in early February of this year as global inventories are below OPEC’s target or the five-year average in most locations including the US. Even though US combined stocks increased in this week’s report the total is still below the five-year average. Further adding to the negative sentiment in the oil pits was declining equity markets around the world offset somewhat by a falling US dollar.

That said the US dollar has been in an uptrend since early April which has acted as a negative cloud overhanging the oil and broader commodity complex. On the financial front, global equity markets were mostly lower.

The EMI Index was lower after a decline in US equities as well as most indices around the world. The EMI Index decreased 1.1 percent on the day with the year to date gain at 2.5 percent.

Six of the ten bourses in the Index are in positive territory for 2018 with China still holding the worst performing spot in the Index with Brazil in the top spot with a 5.8 percent gain for the year. The negative value direction in global equity markets was a negative price driver for the oil complex.

On the currency front, the US dollar Index is lower on the day with the Yen/USD and the Euro/USD mixed. Overall the currency markets were a positive price driver for the oil complex.