Market Report & Analysis for 2/1/2019 Morning Edition

Morning Market Overview

Oil prices continued marching higher Wednesday driven by a bullish overall weekly EIA oil inventory report and a dovish outcome from the US Central Bank FOMC meeting. The ongoing situation in Venezuela is also adding to the upside price movement.

The spot WTI contract is now at the highest level of the upward trend that began on Dec 24. The spot Brent contract is close but has not set a new high yet. Total combined stocks of crude oil and refined products declined modestly and are now 97.6 million barrels below the high hit in 2017.

The combination of OPEC and its non-OPEC producing partners cutting production coupled with Venezuela now under sanctions could accelerate global inventories entering a sustained destocking pattern and thus push oil prices back to the levels from early October of last year before they came crashing down. yesterday the US Fed concluded their FOMC meeting reporting they did not raise short term interest rates and signaling they would be patient with further rate increases and flexible in adjusting their balance sheet.

The outcome was bearish for the US dollar versus most currency pairs and thus bullish for oil and the entire commodity complex. It also sent equities into rally mode as the Fed outcome is now acting as the so called “Powell put” much like we had the ‘Bernanke put” for equities. On the financial front global equity markets were mostly higher around the world. The EMI Index was higher by 0.36 percent for the day with the year to date gain at 7.1 percent.

All ten bourses in the Index are in positive territory for 2019 with Japan is now holding the worst performing spot in the Index with Brazil in the top spot with an 8.8 percent gain for the year. The higher value direction in global equity markets was a positive price driver for the oil complex.

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