Morning Market Overview

As has been the case since early February volatility and uncertainty emanating from the financial sector has translated to above normal levels of volatility in the oil complex.

Tuesday’s trading in equities which saw a swing from the US Dow being higher by well over 200 points to moving lower by well over 300 points sending oil prices from early day gains to the negative side of the ledger prior the start of the weekly oil inventory report cycle. Further adding downside pressure on oil prices was a rising US dollar versus most major currency pairs. Heading into the API inventory data snapshot the fundamentals were still supportive. Reuter’s reported Saudi Arabia and Russia are working on a long- term pact that would extend controls over world crude oil supply (the areas they control) for a period of 10 to 20 years.

This contrasts with the current production cutting accord which expires at the end of the year. We view this as a step that can only be interpreted as bullish for oil prices if it is accomplished. Yesterday however the market paid little attention to this news.

On the financial front global equity markets were mixed around the world with the US markets strongly lower. The EMI Index decreased by 0.03 percent with the year to date gain now at 1.6 percent. Two of the ten bourses in the Index are still in positive territory for 2018. London is in the worst performing spot in the Index with Brazil in the top spot with a 10.3 percent gain for the year. The lower value direction in global equity markets is a negative 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 lower.

Overall the currency markets were a negative price driver for the oil complex.