Morning Market Overview
Oil prices were hit hard again Thursday in what was a so called “risk-off” day in a variety of asset markets. Equities were strongly lower and the USD was modestly higher versus most currency pairs acting as a strong negative for oil prices. This coupled with a growing sentiment that there may be plenty of oil available to the market (even as Iranian supplies decline due to sanctions) is resulting in a bearish sentiment cloud engulfing the marketplace.
The spot WTI contract has declined around $8/bbl or 10.4 percent since hitting a peak on Oct 3. The Brent contract has experienced similar declines. With the official installation of US sanctions on Iran less than two weeks away the market seems to be less and less concerned as each day goes by. We expect trading to remain at an above normal level of volatility for the coming weeks with more downside bias barring any new unexpected crude oil supply disruptions.
On the financial front global equity markets were lower across the board.
The EMI Index decreased by 1.15 percent on the day. The year to date gain 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 a 1.3 percent gain for the year. The negative value direction in global equity markets was a negative 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.