Market Report & Analysis for 6/11/2018 Morning Edition

Morning Market Overview

Despite this week’s bearish weekly inventory snapshot most oil market participants are becoming more concerned with the evolving geopolitical risk in the Middle East and Venezuela. It also appears the market is discounting the fact that Saudi Arabia and Russia indicated they would seriously consider increasing production at the June 22 meeting.

Oil was higher across the board with the Brent/WTI spread surging back above the $11/bbl threshold indicating the market is placing more upside price risk on the international aside of the crude oil market. On the external front the declining US dollar was a clear oil price support Thursday as was the modest rally in US equities (although as discussed below the global EMI Index hovered around unchanged on the day). Oil prices are still well off the highs hit in the thirds week of May. That said the decline has been modest (around 10% or so) with prices looking like they may be forming a bottom as the industry awaits the upcoming OPEC meeting. On the financial front global equity markets were mixed yesterday even with a modest increase in US equities.

The EMI Index was around unchanged after another strong decrease in Brazilian equities. The EMI Index was unchanged on the day with the year to date gain at 0.9 percent. Six of the ten bourses in the Index are still in positive territory for 2018 with China still holding the worst performing spot in the Index with Hong Kong in the top spot with a 5.3 percent gain for the year. The unchanged value direction in global equity markets was a neutral price driver for the oil complex. On the currency front the US dollar Index was lower on the day with the Yen/USD and the Euro/USD higher. Overall the currency markets were a positive price driver for the oil complex.