Market Report & Analysis for 12/21/2018 Morning Edition

Morning Market Overview

Oil prices reversed three days in a row of losses after an overall bullish weekly EIA oil inventory report that showed total combined stocks of crude oil and refined products decreased by 10.3 million bbls. In the last three-weeks total US stocks declined by 24.6 million bbls. It all looks like the tide may have turned but it could be more about year-end accounting adjustments could be underway.

We will have to wait until we get into January to see if the inventory trend is revered upwards. The price gains held in place despite the US Fed raising short-term interest rates by 25 basis points Wednesday erasing early gains in equities providing a negative backdrop to the growth cycle of the US economy.

The only positive that came from the Fed meeting is an indication that they may only raise rates two times in 2019 down from three times after the previous meeting. On the fundamental front Saudi Arabia’s oil minister indicated he was confident that inventories will begin to decline in Q1 and the current accord will likely extend when they meet in April.

On the financial front global equity markets were mixed with the US market shedding its strong gains from early in the session and sliding deeply into negative territory after the Fed raised short-term rates. The EMI Index was lower by 0.74 percent for the day with the year to date loss at 1.9 percent. Only one of the ten bourses in the Index are in positive territory for 2018 with China holding the worst performing spot in the Index with Brazil in the top spot with a 13.1 percent gain for the year. The lower value direction in global equity markets was a negative price driver for the oil complex.

On the currency front the US dollar Index was slightly lower for the day with the Yen/USD and the Euro/USD higher. Overall the currency markets were a neutral price driver for the oil complex.