Morning Market Overview
The oil market was primarily driven by the imposition of sanctions on Venezuela Tuesday as the situation continues to evolve. The gains in the oil complex mostly offset Monday’s losses with the spot Nymex WTI contract trading within a $1/bbl or so of the high hit on Jan 22. Although the market has been trading in a choppy, sideways pattern it is closer to the high of the trend that began on Dec 24. Oil prices remain in an uptrend, but the level of uncertainty is at a very elevated level. Venezuela is one of the top three companies selling heavy HS crude oil to US refiners (Citgo a Venezuelan owned company largest user).
Total Venezuelan crude oil sales to the US have been running about 500,000 bpd. With the new sanctions’ regime on Venezuela oil flow to the US is likely to be curtailed significantly. This is pushing US refiners to seek alternative supplies from within the US and from other international sources like Mexico and Iraq. The oil industry is very good at re-optimizing oil supply and logistics and this issue will be solved in the short term. It could even include a release from the SPR if warranted. On the financial front global equity markets were mixed around the world.
The EMI Index was lower by 0.51 percent for the day with the year to date gain at 6.7 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 8.6 percent gain for the year. The lower value direction in global equity markets was a negative 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 comple.