Market Report & Analysis for 6/4/2018 Morning Edition

Morning Market Overview

An early morning look at the markets show the complex lower across the board, however there will be plenty to digest before the weekend that could change directions. Oil prices were mixed Thursday following a mixed EIA weekly inventory snapshot with one of the main features the continued strong widening of the Brent/WTI spread.

On an intraday basis the spread was trading over $11/bbl premium of Brent over WTI but did end the day around $10.70/bbl premium. Clearly the economics of exporting crude oil from the US are very strong. The spread has been mostly driven of late over growing concerns over the logistics/infrastructure constraints in the US producing regions and the negative impact it could have on US crude oil prices.

On the other hand, even with the talk of a possible increase in production the market remains concerned over the restraint of international crude as well as the ongoing geopolitical risk in the Middle East and Venezuela which is clearly supporting the Brent contract. On the financial front global equity markets were mixed yesterday as concerns were elevated over a potential trade war after the US announced the implementation of steel and aluminum tariffs.

The EMI Index was higher even after a strong decrease in US equities. The EMI Index increased 0.11 percent on the day with the year to date gain at a negative 0.2 percent. Only four of the ten bourses in the Index are still in positive territory for 2018 with China still holding the worst performing spot in the Index with Hong Kong in the top spot with a 1.8 percent gain for the year. The positive value direction in global equity markets was a positive 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 higher. Overall the currency markets were a positive price driver for the oil complex.