Morning Market Overview

Oil prices surged higher on Tuesday as trade war concerns eased strongly. As we have been discussing the price activity in oil is directly related to the direction of the externals which are being driven in the short term by the on again, off again concerns over trade issues as well as inflation risk.

Overnight the President of China promised to open China’s economy further and lower import tariffs. This was a clear message that the US and China are negotiating, and the likelihood of a trade war anytime soon is not very high. I remain of the view that so far this is low risk to the markets in the short term.

The oil market mostly ignored the EIA Short-Term Energy Outlook report which was a tad bearish and traded primarily around strong upside moves in most equity markets around the world as well as supported by a declining US dollar versus most major currency pairs. Further support was also garnered from a growing concern over what the US will do in retaliation to Syria’s chemical bombings over the weekend.

Tuesday Brent was trading at the highest level since late January and well off the lows hit in early February. The complex remains in an uptrend and as we have been indicating it is likely to remain in a medium-term uptrend as long as the fundamentals do not turn negative. On the financial front, global equity markets were higher across the board on Tuesday.

The EMI Index was higher after declining yesterday. The EMI Index gained 1.07 percent on the day with the year to date gain is at 2.4 percent. Two of the ten bourses in the Index are still in positive territory for 2018 with London holding the worst performing spot in the Index with Brazil in the top spot with a 10.1 percent gain for the year. The positive value direction in global equity markets today was a positive price driver for the oil complex