Market Report & Analysis for 5/2/2018 Morning Edition
Morning Market Overview
After starting the week strongly lower oil prices reversed course intraday and pushed into positive territory by the end of the trading session Monday.
The reversal catalyst was a result of comments coming from Israel’s Prime Minister Netanyahu indicating that they have proof that Iran lied about their nuclear program after signing the deal with the west. The comments are feeding into a growing view that the US may pull the plug on the deal and re- impose strong sanctions against Iran.
President Trump has until May 12th to decide on whether to restore sanctions on Iran that were removed after the nuclear deal was signed. Thus, this issue will likely be a volatile catalyst that will continue to impact the short- term direction of oil prices until the US decision is known. Between now and then it is highly unlikely that oil prices will drop significantly unless the signal from the US turns out to be to just roll-over the current agreement as is. As we have been suggesting we remain short and medium term bullish for oil prices.
Monday’s intraday price activity supports the view of taking advantage of buying dips rather than selling short term rallies is still the optimum strategy. This week’s round of oil inventory reports will be scrutinized very closely after the EIA reported a small build in total US combined stocks of crude oil and refined products last week. On the financial front global equity markets were mixed on Monday.
The EMI Index ended the trading day higher even with a strong decline in US equities. The EMI Index increased 0.30 percent on the day with the year to date gain at 4 percent. Four 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 13.1 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 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.
