Morning Market Overview
Oil and most all risk assets were hit with a strong round of selling Wednesday as the equity complex was pounded lower on concerns over inflation risk, higher US interest rates and exposure in Italy and the broader EU as well as concern over slowing global growth.
On the oil front declining equity values placed strong selling pressure on oil as long side traders headed to the sidelines on fears that if global economic growth is slowing oil demand growth will also slow and offset some of the bullish outcome of the Iranian sanctions. However, as we have been mentioning the market opinion has been changing almost daily over what will be the impact of the Iranian sanctions. Yesterday was true to form.
This afternoon the API started the weekly inventory report cycle with larger than expected builds in crude oil stocks and gasoline inventories while distillate fuel stocks declined more than expected. Total combined inventories of crude oil and products were strongly higher on the week. Overall the market added to its pre-API report losses except for ULSD after the API inventory report release hit the media airwaves. The API reported US crude oil stocks increased by 9.7 million barrels on the week.
Cushing crude oil stocks increased by 2.2 million barrels. They also reported a 3.5 million bbl draw in distillate fuel inventories and a 3.4 million bbl build in gasoline stocks. Total combined inventories of crude oil and refined products were higher for the week and outside the range of market expectations. On the financial front global equity markets were mostly lower on the day with large losses in several bourses around the globe. The EMI Index was lower after strong declines in both the US and Brazil. The EMI Index decreased by 1.89 percent on the day. The year to date gain is now at 1.1 percent.
Four 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 Brazil now in the top spot with a 9.5 percent gain for the year. The negative value direction in global equity markets was a negative price driver for the oil complex.