Morning Market Overview

Oil prices surged higher once again after an overall bullish weekly oil inventory snapshot issued by the EIA Wednesday.

Total combined stocks of crude oil and refined products not only declined strongly but are now modestly below the five-year average for the same week. In the largest consuming (and producing) country in the world the OPEC (and non-OPEC partners) objective of returning oil inventories back to the five-year average is accomplished at least for the time being. From a short and medium term fundamental viewpoint, the market is bullish with the likelihood that priced could move even higher compared to current levels. On the OPEC front Reuter’s reported today that Saudi Arabia would like to see oil back to the $100/bbl level. With inventories remaining in a modest destocking pattern the $100/bbl objective does seem very possible at this point. Also, the Saudi comments strongly suggest that there will be no wavering in the OPEC/non-OPEC production cutting accord anytime soon.

On the external front global equities were higher providing additional support to yesterday’s oil price rally even though the US dollar index increased slightly offsetting some of the positives coming from the equity complex.

The much talked about trade wars circulating over the media airwaves between China and the US have moved to the back burner as has talk of an imminent surge in inflation… all positives for the equity complex and thus for oil prices. On the financial front global equity markets were higher on Wednesday.

The EMI Index able to end the day in positive territory with a strong gain in US equities. The EMI Index increased 1.38 percent on the day with the year to date gain is at 3.8 percent. Four of the ten bourses in the Index are now in positive territory for 2018 with London holding the worst performing spot in the Index with Brazil in the top spot with an 9.9 percent gain for the year. The positive value direction in global equity markets today was a positive price driver for the oil complex.