Market Report & Analysis for 5/10/2018 Morning Edition

Morning Market Overview

Oil prices reversed hard overnight and are significantly higher this morning. Prices started the trading session modestly lower Tuesday ahead of the announcement by “President” Trump on the US decision on the Iranian nuclear deal and ahead of a busy cycle of fundamental oil data releases. “President” Trump did as many had expected and pulled the US out of the nuclear agreement.

Oil prices did eventually recover some of their earlier intraday losses, but the oil complex still ended the day lower by around 2.3%. As has been the case for the last few weeks the short-term price direction of the oil complex has been primarily driven by the lead up to the US announcement on the Iranian nuclear deal.

Thus the way the market reacted we can conclude that the outcome to pull out of the deal was already priced into the market and yesterday’s trading action was clearly a buy the rumor, sell the fact type of session. Now market participants will enter a period of digesting the outcome and looking for all signs as to how and when the sanctions will be imposed and what the outcome will be on Iranian oil supply and ultimately on the price of crude oil.

On the fundamental front the EIA Short Term Energy Outlook was biased to the bearish side while the API weekly inventory report was bullish showing an across the board draw in the energy commodities. On the financial front global equity markets were mixed on Tuesday. The EMI Index ended the trading day higher with a small gain in US equities.

The EMI Index increased 0.34 percent on the day with the year to date gain at 3 percent. Five 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 an 8.6 percent gain for the year. The positive value direction in global equity markets today was a positive price driver for the oil complex.