Market Report & Analysis for 7/11/2018 Morning Edition
Morning Market Overview
Oil prices were higher across the board on Monday with the WTI contract struggling to move into positive territory on news that Canadian Syncrude oil production would start to partially come back onstream by the end of July running about 60 to 70 percent of capacity in August and full production by September (Reuters).
On the other hand, the rest of the market was more driven by concerns over reduction of Iranian crude oil exports with the US pushing for exports to go to zero because of its strong sanctions. Adding to the geopolitical risk of declining Iranian production is the evolving situation in Venezuela, Libya and Angola who all are running at producing levels well below their capabilities. This will be a big week for oil fundamental data with not only the normal weekly round of inventory reports but the monthly oil forecasts will be issued by the EIA, IEA and OPEC. The EIA starts the cycle with the release of its Short-Term Energy Outlook (STEO) report, followed by the OPEC monthly forecast and the IEA oil market report expected to be released early Thursday morning.
The market will be paying attention to the forecast of oil production over the next year from both the international side as well as US crude oil production. There should be an increase in production from Saudi Arabia, Russia and several other OPEC countries but a decline in some of the problem countries. In addition, the market will be looking for any possibility of US crude oil production growth slowing due to the bottlenecks evolving in the US. On the demand side the reports are likely to address the potential for an increase to a full blow trade war with the US, China and even Europe. We do not think they will slow their forecasts for demand rather they will raise the caution flag.
On the financial front global equity markets were higher across the board continuing where they left off on Friday. The level of uncertainty remains is still at an elevated level. The EMI Index was higher with gains in all ten bourses in the Index.
The EMI Index was higher by 0.86 percent on the day with the year to date loss at 1.7 percent. Five of the ten bourses in the Index are now in positive territory for 2018 with China still in the worst performing spot in the Index with Australia in the top spot with a 5 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 higher on the day with the Yen/USD and the Euro/USD mixed. Overall the currency markets were a slight negative price driver for the oil complex.
