Morning Market Overview

Oil prices rose for the second day in a row Thursday, but the gains were modest as prices are still lower for the week to date. A strong up move in US equities more than offset the gains in the US dollar resulting in the externals acting as an overall positive price directional catalyst for the oil markets.

The short-term fundamentals remain supportive, but the caution flag is flying after Wednesday’s EIA report showed a small build in total combined stocks of crude oil and refined products. The long-term inventory destocking trend could be stalling. With US crude oil stocks building and the geopolitical events still evolving in the Middle East the big change in the market on the crude oil side was a strong widening of the Brent/WTI spread.

The spot spread widened by over 10 percent sending the spread to $6.56/bbl Brent over WTI. This is the highest level since last year and a very strong level to economically support further exports of US crude oil. On the financial front global equity markets were mostly higher on Wednesday.

The EMI Index ended the trading day higher as US equities were strongly higher Thursday. The EMI Index increased 0.52 percent on the day with the year to date gain at 3.6 percent. Three of the ten bourses in the Index remain in positive territory for 2018 with China still holding the worst performing spot in the Index with Brazil in the top spot with a 12.4 percent gain for the year.

The overall increase in the Index in US equities was a positive price driver for the oil complex. On the currency front the US dollar Index traded 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.