Market Report & Analysis for 12/4/2018 Morning Edition

Morning Market Overview

The main story out of the G20 in Argentina is Presidents Trump and Xi Jinping have agreed to a 90-day trade war cease fire while negotiations continue. During the cooling off period no new tariffs will be imposed with China agreeing to purchase a not yet agreed upon, but very substantial, amount of agricultural, energy, industrial, and other product from the United States to reduce the trade imbalance between the US and China. This should at least temporarily put a bottom in financial and commodity market prices as a ray of optimism will permeate through the markets.

At least at the start of trading Monday morning there is a relief/short covering rally to start the new week in equities and in most commodities. However, the market will remain volatile as 30 second news snippets hit the media airwaves from both side over the next three months as the negotiations move along. Also, Russia and Saudi Arabia indicated at the G20 that they would decrease production by a yet to be agreed upon level.

This should at least limit the strong selling that has hit the oil pits since the beginning of October. However, unless OPEC and its non-OPEC partners decrease production by 1 million bpd or more at the Dec 6 meeting the market is going to yawn at the meeting and likely send prices lower.

Last week the latest Baker Hughes data hit the media airwaves reporting the number of rigs deployed to the US oil sector increased by 2 rigs on the week after decreasing during the previous week. Total US crude oil production is about 20.84 percent above where it was for the same week a year ago. This week’s production came in at 11.7 million bpd.