Market Report & Analysis for 7/4/2018 Morning Edition

Morning Market Overview

Refined product prices tumbled Monday and after rising strongly last week, crude prices started the shortened US trading week in negative territory as well. the Market remained on the negative side of the ledger throughout Monday’s session.

There are many factors that could be driving oil prices lower this week but the one most publicized today was the discussion over the weekend between President Trump and the Saudi Arabian King. These discussions resulted in the Saudi King indicating that Saudi would meet any oil demand and shortfall and they in fact do have around 2 million bpd of surplus capacity. In addition to the Saudi/US comments there is also a round of profit taking selling going on after last week’s strong gains.

Further supporting the sell side of oil is the turmoil evolving in Europe as the EU immigration agreement reached last week may not be acceptable to a contingency of leaders within Germany. This has sent the US dollar higher (especially versus the euro) as well as putting pressure on global equity markets… both a negative price driver for the oil complex. As mentioned many factors that can be directly attributed to oil falling Monday but so far, the decline has not been very strong except for the spot Sep Brent contract which is down around 2.4 percent. The larger decline in Brent is reflective of the view that additional oil flowing into the market from OPEC will impact Brent and those crude that are indexed to Brent more so than WTI.

Also with Canadian Syncrude still expected to be interrupted through at least July US crude oil imports and thus inventories could remain in a string destocking pattern especially in Cushing. On the financial front global equity markets were mostly lower over the evolving issues in the EU over immigration. The level of uncertainty remains at an elevated level.

The EMI Index was lower with gains in four of the ten bourses in the Index. The EMI Index was lower by 0.08 percent on the day with the year to date loss at 3.6 percent. Only two of the ten bourses in the Index are still in positive territory for 2018 with China still in the worst performing spot in the Index with Australia in the top spot with a 3.4 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 higher on the day with the Yen/USD and the Euro/USD lower. Overall the currency markets were a negative price driver for the oil complex.