Market Report & Analysis for 10/16/2018 Morning Edition

Morning Market Overview

Oil declined strongly last week and is lower for the second week in a row as projections (by the EIA, IEA and OPEC) for global oil demand growth easing sent a large contingency of long side traders to the sidelines. When the dust settled, crude oil prices were down by over 4 percent with RBOB leading the market lower with a 6.6 percent loss of the week.

The upward movement in prices that began in mid-August and has been driven by a view that the advent of oil sanctions on Iran by the US would result in a tight global oil market. However, the view is changing as US and global inventories are building, oil production is rising, and global oil demand growth may be easing thus suggesting global supply and demand balances may not experience any major imbalances as the sanctions move into play on Nov 5.

As a caution the two views discussed have been moving market trading activity for several months with market participants shifting several times as to which view of the post Iranian sanctions regime they subscribe to. This uncertainty is likely to continue with a few more shifts also a potential in the forward period.

Friday afternoon the latest Baker Hughes data hit the media airwaves reporting the number of rigs deployed to the US oil sector increased by 8 rigs on the week after decreasing during the previous week. Total rigs deployed to the oil sector are higher by 126 or 17 percent year over year. Total US crude oil production is about 18.1 percent above where it was for the same week a year ago. This week’s production came in at 11.2 million bpd.