Morning Market Overview
The oil rally continued with the spot Nymex WTI contract breaking out of the medium term downward sloping linear regression trading pattern. The breakout came ahead of the start of this week’s inventory report cycle which is projected to show a build in total combined stocks of crude oil and refined products.
Although the market is still concerned about a slowdown in global demand growth supply cutbacks are taking center stage and for the moment offsetting the demand concerns. The oil complex increased for the seventh trading day in a row with the low established on December 24.
A series of bearish fundamental reports in the coming days could at least temporarily derail the recovery rally. However, the momentum is currently pointing upward with Brent possibly trading back in the $60’s and WTI back into the $50’s. Saudi Arabia’s crude export reduction of 800,000 barrels per day below November level have become a decisive factor for global oil prices at the start of the year.
A survey by S&P Global Platts indicates the Organization of Petroleum Exporting Countries’ de-facto leader lowered its output by 401,000 barrels a day in December to 10.6 barrels a day, while OPEC’s cumulative production fell by 630,000 barrels a day to a six month low of 32.43 million barrels from November level.
On the financial front global equity markets were mostly higher around the world. The EMI Index was higher by 0.30 percent for the day with the year to date gain at 3.9 percent. All ten bourses in the Index are in positive territory for 2019 with Hong Kong holding the worst performing spot in the Index with Brazil in the top spot with a 7.3 percent gain for the year. The higher value direction in global equity markets today was a positive price driver for the oil complex.
On the currency front the US dollar Index was higher for the day with the Yen/USD and the Euro/USD lower. Overall the currency markets were a negative price driver for the oil complex.