Market Report & Analysis for 7/13/2018 Morning Edition
Morning Market Overview
The market is seeing a slight bump higher so far this morning after the drubbing it took yesterday. Wednesday could be considered a risk-off day if we can use that cliché. Everything that has been right for the bulls suddenly turned wrong. Libyan production which has been running at about half of its capacity will be returning as Libya re-opens its four closed ports with exports projected to return to normal. Adding to the bearish overtone was news that the US may entertain exemptions for select countries from US sanction on Iranian crude oil.
Also, there is a cloud hanging over the market that participants are starting to pay more attention to and that is the approximate 1 million bpd pledged an increase in production from OPEC along with the Saudi King’s assurance to President Trump that they would meet all demand and continue to increase production as needed. The tide is changing (at least for now) with the market now more concerned about the growth in production rather than the loss due to geopolitical events around the world.
The externals also added to the bearish tone in the market as global equities were strongly lower across the board with the US dollar higher versus most major currencies as the US seemed to raise the stakes in the evolving trade dispute with China. President Trump tweeted that he requested the US to look at adding tariffs to another $200 billion in goods imported from China. China indicated they are working on a retaliation plan.
The atmosphere of a full blown trade war is truly having strong negative consequences on global stock markets as many financial traders seem to be running for cover until the dust settles.
The spot Sep Brent contract has now erased almost all the price gains since the June 22nd OPEC meeting with the WTI contract shedding about 40 percent of the post meeting gains. The Sep Brent/WTI spread narrowed almost 24 percent or $1.50/bbl compared to the previous settle to $4.81/bbl. The economics of exporting crude oil from the US has dwindled significantly since peaking in early June when the Brent/WTI spread was trading above $11/bbl.