Morning Market Overview

Oil prices were unable to start the new trading year where they left off 2017. Crude oil prices traded either side of unchanged for most of the day yesterday only to end in negative territory. RBOB gasoline was the main downside driver of the session falling 1.8 percent.

Even the ULSD/HO contract declined on one of the coldest days of the winter heating season. The two main supply issues that hit the market in the second half of December 2017 have now been mostly resolved. The Forties pipeline system and the Libyan pipeline are now both operating after repairs to both systems.

Cargoes are loading bringing supply back to where it was in the first half of December. Mitigating some of the downside risk to crude oil prices Tuesday was the evolving situation in Iran where large scale protests have been underway for the last few days. So far there has been no indication that the protests are anywhere near the main oil producing/ports for Iranian crude oil. No signs of any disruption.

However, this is a risk that the market is watching closely and one that could evolve into a problem.

Geopolitical events are starting to take on a higher level of importance in the oil pits now that global oil inventories are in a destocking pattern. Overall, we still view oil as being in a slowly evolving uptrend.

We currently view the oil market as a buy the dip market rather than sell the rally. There is still potential upside to the market with higher prices still possible if global inventories remain in a destocking pattern.