Morning Market Overview

Oil prices put in a mixed performance Wednesday as market participants were a bit concerned over the surprise build in total crude oil stocks as well as in Cushing inventories.

On the other hand, the draws in refined product inventories were larger than expected with RBOB gasoline ending the trading day in positive territory while ULSD was only marginally lower.

With total crude and Cushing stocks building it also pushing the May Brent/WTI spread into a new higher trading range. We view yesterday’s fundamental snapshot as overall bullish as total crude and products stocks declined and remain in a stocking pattern. In fact, total US stocks are now only 12.7 million bbls above the five-year average with total crude stocks already slightly below the five-year average even after today’s reported build.

Recall OPEC’s objective of the production cutting accord is to push global inventories back to the five-year average. With the US a major part of global inventories that objective is just about complete. So overall, we are still positive on oil and remain of the view that the risk is to the upside not the downside currently. Oil prices are not getting any help from the externals as the US Dollar Index (versus 7 major currencies) was higher by almost 1 percent while global equities were mostly lower around the world with the US markets trading in a skittish up and down pattern throughout the day. Both externals were a negative for oil prices Wednesday.

On the financial front global equity markets were mostly lower around the world with the US markets trading in an erratic up and down pattern. The EMI Index decreased by 0.72 percent with the year to date gain now at 0.6 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 9.3 percent gain for the year. The lower value direction in global equity markets is a negative price driver for the oil complex.