Morning Market Overview

In the pre-API inventory report release and after a somewhat bearish EIA Short Term Energy Outlook report yesterday the market spend most of the trading session on the defensive. The spot Brent contract led the market lower despite the Forties Pipeline remain shut down for several weeks.

According to Reuter’s the line was schedule to pump abut 406,000 bpd. If it remains shut for 14 days that would result in about 5.7 million bbls of oil shut in or almost 3 VLCC’s worth of oil. It is a large amount but not insurmountable as there still exists a significant surplus of oil around the globe including the US. With the Brent/WTI spread hitting $7/bbl at one point on an intraday basis (ending the day around $6.40/bbl) there is ample economic room for exports to flow from the US to supply locations that were expecting Forties crude oil.

In short, the sudden gains in oil prices over the pipeline shut down was a bit overstated and later Tuesday a modest of profit taking ensued. In the afternoon the API started the weekly inventory report cycle with a mixed inventory snapshot. Crude oil inventories declined more than expected but gasoline and distillate stocks were within the market expectations for a modest build. The total combined inventories of crude oil and products were modestly lower on the week. Overall the market pared some of its intraday crude oil losses after the report was issued.

On the financial front global equity markets were mostly higher. The Index traded higher with the US markets in positive territory throughout the US trading session. The EMI Index increased by 0.51 percent with the year to date gain hovering around 19.4 percent and a new high for the year.

All ten bourses in the Index remain in positive territory for 2017. London is in the worst performing spot in the Index with Hong Kong still in the top spot with a 30.9 percent gain for the year. The higher value direction in global equity markets was a positive price driver for the oil complex.