Market Report & Analysis for 5/21/2018 Morning Edition

Morning Market Overview

Oil prices traded higher throughout the session on Thursday with the spot July Brent contract trading over $80/bbl on an intraday basis but settling below this level by the end of the day. Oil continues to be driven by the looming geopolitical issues in and around the Middle East as the externals were a negative for oil prices today. Thursday the US dollar Index was higher while US equites were lower both a negative price directional driver for the oil complex as well as other commodities.

However, the market is primarily focused on the bubbling geopolitical issues around the world with the US pullout of the Iran nuclear deal in the forefront as the industry continues to project what the impact may be on Iran’s crude oil exports. We remain of the view that the impact will not be severe and if wrong we also believe that OPEC and other non-OPEC participants to the production cutting accord will welcome the opportunity to make up any lost production for Iran to regain lost market share.

Yesterday several European companies pulled back from Iran raising the market’s concern that production/exports from Iran could be impacted. On the financial front global equity markets were mixed today. The EMI Index was higher even after a modest decrease in US equities.

The EMI Index increased 0.71 percent on the day with the year to date gain at 5.7 percent. Seven of the ten bourses in the Index are in positive territory for 2018 with China still holding the worst performing spot in the Index with Brazil in the top spot with a 13.3 percent gain for the year. The positive value direction in global equity markets was a positive price driver for the oil complex.

On the currency front the US dollar Index was higher on the day with the Yen/USD and the Euro/USD lower. Overall the currency markets were a negative price driver for the oil complex.