Morning Market Overview
Nothing new on the fundamentals side of the oil equation with Thursday’s main negative price driver coming from comments by a Trump advisor indicating that the US-China trade deal still has miles to go before a deal is reached. Global asset markets immediately entered into a risk-off trading pattern sending equities strongly lower and pushing oil prices lower by over 3 percent at one point ending the session about 2.5 percent lower.
Most risk asset markets have been very subject to the daily 30-second news snippets hitting the media airwaves that seem to provide any clue that the global economy could be slowing potentially having a negative impact on oil demand growth. A potential slowing of global oil demand worries traders and investors as it will bring added pressure on OPEC and its producing partners as they continue to further cut production and relinquish more and more market share to US shale producers.
With senior US delegates heading to China next week to continue negotiations, we believe yesterday’s volatile and strong decline in most risk asset markets is a bit overdone. That said we are clearly entering a timeframe where the level of volatility and wide trading range trading will continue as we get closer to the March 1 deadline for a US-China deal to get done or additional tariffs will be put in place. On the financial front, global equity markets were mostly lower around the world.
The EMI Index was lower by 2 percent for the day with the year to date gain at 7.2 percent. All ten bourses in the Index are in positive territory for 2019 with Japan holding the worst performing spot in the Index with Canada in the top spot with a 9.6 percent gain for the year. The higher value direction in global equity markets today was a positive price driver for the oil complex.
On the currency front, the US dollar Index was higher for the day with the Yen/USD and the Euro/USD mixed. Overall the currency markets were a negative price driver for the oil complex.