Market Report & Analysis for 1/29/18 Afternoon Edition
Afternoon Market Overview
The oil complex has traded in a volatile trading range over the last twenty- four hours with the direction of the US dollar having more of a short-term impact on prices than the ongoing current and projected fundamental data. The US dollar Index (USD versus seven major currencies) has been in a downtrend since the middle of December of 2017.
Over the last few trading sessions the selling was pronounced, reversed and then back on the defensive after comments coming from the US Treasury Secretary as well as the President of the US. Oil prices (which are inversely correlated to the direction of the USD) have bounced around with the intraday changes in the US dollar. The USD Index is back on the defensive this morning keeping oil prices modestly bid to start the US trading session. For the moment the USD remains a correlated support for higher oil prices.
The above said the fundamentals will still play a major role in the overall direction of the oil complex. The macro fundamentals are nearing a transition from the high winter demand period to the so-called lower demand shoulder season for oil. In addition, the spring refinery maintenance season is right around the corner which will result in a reduction in refinery utilization rates and thus refiner demand for crude oil. The inventory destocking pattern that has been in play for months in the US and around the world may be ready to transition to a short period of inventory building as US crude oil production just continues to rise.
Time to raise the caution flag for the possibility of a short-term downside correction in prices as a very crowded long side trading community digests how the transition will evolve over the coming month or so. On the financial front global equity markets were mixed over the last twenty- four hours. The Index increased with the US market trading mostly higher through Thursday’s trading session. The EMI Index increased by 1.68 percent with the year to date gain now at 6.7 percent.
Eight of the ten bourses in the Index are now in positive territory for 2018.
London is in the worst performing spot in the Index with Hong Kong in the top spot with a 10.8 percent gain for the year. The higher value direction in global equity markets is a positive price driver for the oil complex.