Market Report & Analysis for 5/4/2018 Morning Edition

Morning Market Overview

Oil trading was volatile again Wednesday with futures prices reversing mid- day from negative territory into a gain for the entire complex except for RBOB gasoline even though we would have to categorize the EIA report as overall bearish. Total combined US stocks of crude oil and refined products were higher for the second week in row raising a strong caution flag that the lengthy destocking pattern could be transitioning.

The above said total US stocks are still 172.2 million bbls below the February 2017 high but now off the low hit a few weeks ago. Although we categorized this week’s fundamental snapshot as bearish we must temper our categorization as most of the inventory build was driven by a strong increase in crude oil stocks on the west coast which generally are choppy.

Often when you get a big build (as this week) it is usually followed by a large draw. We will have to wait until next week to see if the historical pattern remains in place. On the external front the US dollar continued its trek higher with the US dollar index (versus 7 major currencies) increasing again Wednesday for the tenth increase out of the last 12 trading sessions.

The Index made another new year to date high even after the US Central bank did not increase short term rates after their FOMC meeting and commented that inflation is not expected to increase much from the current level. Once the Fed announcement hit the media airwaves US equities moved strongly higher However, as the afternoon wore on a strong round of selling hit the market sending the US Dow down by triple digits and acting as a negative price directional catalyst for the oil and broader commodity complex.