Market Report & Analysis for 10/1/2018 Morning Edition

Morning Market Overview

Oil prices marched higher today but did shed some of their gains after Saudi Arabia said they will quietly add extra oil to the market over the next couple of months to offset a drop in Iranian production but is worried it might need to limit output next year to balance global supply and demand as the United States pumps more crude (Reuters). Not overly bearish with the limitations.

Saudi Arabia is approaching this very cautiously as it was not too long ago when the oil market moved out of control of OPEC resulting in a huge glut of oil and prices declining down into the $30’s. With the formal OPEC meeting scheduled for the first week of December we believe they are taking a wait and see attitude to let the market play out once the US issues (if they do) the sanctions order in early November. Saudi Arabia and the rest of their OPEC and non-OPEC allies want to keep oil prices in at least the $70 to $80/bbl range going forward. Setting price targets is a difficult game to play and one that has not worked very well for OPEC in the past. For now, the sentiment is still to the upside with downside risk including an unexpected meeting between the US and Iran. On the financial front global equity markets were mostly higher. The EMI Index was higher for seven of the ten bourses in the Index.

The EMI Index increased by 0.47 percent on the day with the year to gain at 1.7 percent. Six of the ten bourses in the Index are still in positive territory for 2018 with China still in the worst performing spot in the Index with the US in the top spot with a 7 percent gain for the year. The positive value direction in global equity markets was a positive price driver for the oil complex. On the currency front the US dollar Index is higher on the day with the Yen/USD and the Euro/USD lower. Overall the currency markets were a negative for the oil complex.