Market Report & Analysis for 10/25/2018 Morning Edition

Morning Market Overview

A wild and volatile day in the trading world Tuesday saw oil down over 4 percent on the day in the midst of a global sell-off in equities. That said US equities staged a strong comeback from the morning lows but still ended the session lower. Oil was also hit with a bearish overtone coming from the Saudi comments about production increases with the market becoming more comfortable with the scenario that production increases are likely to offset Iranian export decline with new sanctions ready to hit in less than two weeks.

The Saudis said they and their Gulf allies are in a “produce-as-much-as- you-can mode,” engineered to offset production losses by Venezuela and Iran as the U.S. sanctions set to take effect in less than two weeks is seen sharply reducing Iranian oil exports. World oil demand is forecast to reach a record high of about 100 million bpd in the current quarter while spare world oil capacity has dropped to a minimal 2%.

Oil prices are now down by over $11/bbl since peaking in early October. Since then global fundamentals are continuing to improve as global stocks are building. In addition, global financial markets have been completely unstable for the last several weeks with concerns over inflation risk in the US, global demand projected to slow including China.

On the financial front global equity markets were lower across the board. The EMI Index decreased by 1.19 percent on the day. The year to date gain is now at 0.1 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 12.6 percent gain for the year. The negative value direction in global equity markets was a negative price driver for the oil complex.