Market Report & Analysis for 6/13/2018 Morning Edition

Morning Market Overview

Oil prices started to show the early signs of forming a bottoming pattern with the spot WTI contract ending the week with only a marginal loss after being much lower earlier in the week.

Oil trading continues to be driven by talk of Saudi Arabia and Russia pushing for an increase in production versus pushback starting to come from other OPEC members like Iran. With the potential loss of production from the US adding new sanctions on Iran as well as the deteriorating production from Venezuela as their economy spirals lower on a weekly basis barring a production increases oil prices are likely to resume their medium-term upside rally.

The level of uncertainty and thus volatility remains elevated as many oil traders have taken a short-term approach to the market and seem reluctant to enter any longer-term trades until there is more clarity as to what the outcome of the OPEC meeting will be. The next several weeks leading up to the June 22 OPEC meeting will be driven by the 30 second news snippets hitting the media airwaves over what OPEC will or will not do regarding their production cutting accord. In addition, there also remains an elevated level of uncertainty and volatility in the financial markets with potential tariff/trade wars as well as what the outcome of the US/North Korea meeting.

Friday afternoon the latest Baker Hughes data hit the media airwaves reporting the number of rigs deployed to the US oil sector increased slightly last week by 1 rig after increasing marginally during the previous week. The latest rig data continues to support the overall uptrend in the US oil rig count remains. Total rigs deployed to the oil sector are higher by 121 or 16.3 percent year over year. Total US crude oil production is about 16 percent above where it was for the same week a year ago. This week’s production came in at 10.800 million bpd.