Market Report & Analysis for 10/17/2018 Morning Edition

Morning Market Overview

Oil prices were higher Monday after falling strongly last week. Yesterday’s gains were relatively minor compared to the magnitude of last week’s decline in value. Aside from the ever-changing market view over the impact of the US sanctions on Iran (set to come into play in early November) the evolving geopolitical issue between the West and Saudi Arabia is adding a new layer of potential upside oil price risk.

The disappearance of Washington Post journalist James Khashoggi after entering the Saudi Embassy in Turkey on Oct 2 is turning out to be a huge mystery with potential sanctions against Saudi Arabia if it is proven he was killed in the Embassy as some are suggesting.

Depending on what happened to Mr. Khashoggi sanctions could be placed against Saudi Arabia and Saudi Arabia could retaliate by suppressing their crude flow from the region. So far, the market is not building in any upside price risk from this issue, but it is still early in the investigation. On many fronts the next directional move in prices will continue to be driven by the many evolving geopolitical issues bubbling up around the world.

On the financial front global equity markets were mixed on the day with large losses in the Asian bourses. The EMI Index was lower with the strongest percentage decline coming from Japan.

The EMI Index decreased by 0.22 percent on the day. The year to date loss is now at 0.4 percent.

Only two 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 an 9.6 percent gain for the year. The negative value direction in global equity markets was a negative price driver for the oil complex.