Market Report & Analysis for 5/3/2018 Morning Edition

Morning Market Overview

Oil prices were on the defensive throughout Tuesday’s trading session as market attention shifted to the record level of US crude oil production as the inventory report cycle was set to get underway. In addition, the rising US dollar versus most major currencies (and lower equity values) weighed on prices.

The US dollar index (versus 7 major currencies) moved strongly higher for the ninth trading day out of the last eleven sending the Index to the highest level of the year. Currency traders are awaiting the outcome of the US Central Bank meeting.

The market will closely be scrutinizing not only the action (raising rates) as well as the comments as to the state of the economy. Based on the way the US dollar has been trading suggest the market is pricing in not only another increase in short term interest rates but dollar bullish comments coming from the meeting. A rising US dollar is a negative for oil prices.

Not much new on the geopolitical front as concern is still high that the US will pull out of the Iran nuclear deal and re-introduce strong sanctions on Iran. If that is the case it will result in a reduction of crude oil exports from Iran to some level. The possibility of this action is providing at least a floor in oil prices.

On the financial front global equity markets were mixed on Tuesday. The EMI Index ended the trading day lower with a modest decline in US equities.

The EMI Index decreased 0.12 percent on the day with the year to date gain at 4.2 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 12.7 percent gain for the year. The negative value direction in global equity markets today was a negative price driver for the oil complex.