Market Report & Analysis for 1/28/2019 Morning Edition

Morning Market Overview

Oil prices were mostly higher Thursday after a bearish weekly oil inventory report that saw total gasoline stocks hit a new record high. Support came mostly from the evolving geopolitical situation in Venezuela which could result in an interruption in exports. The externals were mixed with global equities rising (not in the US) providing some support but offset by a relatively large move upward in the US dollar versus most currency pairs.

The near-term exposure in Venezuela would come from the US implementing sanctions and preventing oil flow to the US and likely elsewhere. With Iranian production/exports curtailed to below a 1 million bpd and with the voluntary cuts by OPEC and its producing partners a loss of exports from Venezuela could accelerate global inventories entering a sustained destocking pattern.

Thursday’s EIA Annual Energy Outlook 2019 depicts why OPEC and its producing partners continue to look very closely as the US. The EIA Reference case projects that in 2020, for the first time in almost 70 years, the United States will export more energy than it imports and will remain a net energy exporter through 2050. U.S. energy export growth is driven largely by petroleum exports including crude oil and products, and by additional liquefied natural gas exports.

These trends have become clearly established, and the Reference case shows them continuing for the next few years, and then slowing and stabilizing. “The United States has become the largest producer of crude oil in the world, and growth in domestic oil, natural gas, and renewable energy production is quickly establishing the United States as a strong global energy producer for the foreseeable future” said EIA Administrator Linda Capuano. “For example, the United States produced almost 11 million barrels per day of crude oil in 2018, exceeding our previous 1970 record of 9.6 million barrels.” On the financial front global equity markets were mostly higher around the world.

The EMI Index was higher by 0.79 percent for the day with the year to date gain at 6.8 percent. All ten bourses in the Index are in positive territory for 2019 with London holding the worst performing spot in the Index with Brazil in the top spot with a 9.9 percent gain for the year. The higher value direction in global equity markets today was a positive price driver for the oil complex.