Market Report & Analysis for 6/26/2018 Afternoon Edition
Afternoon Market Overview
Oil prices ended Friday’s trading higher with the complex finishing with a weekly gain after decreasing in value the previous week. Last week WTI crude oil increased more than the spot Brent contract after a surprise draw in US crude oil inventories and an increase in OPEC production which will impact Brent more than WTI.
The August Brent/WTI spread narrowed strongly last week with Brent still trading at a strong premium to WTI. The August Brent premium to WTI remains wide enough to keep the arb window open for select US crudes to work into the export market. The spot Aug WTI contract increased on the week and has broken out of the downward sloping linear regression trading channel to the upside. The August Brent contract increased less than WTI resulting in the August Brent/WTI spread narrowing by $1.41/bbl or 16.8 percent to $6.97/bbl by the end of the week. The Aug Brent/WTI moved into a lower technical trading range last week. The Aug WTI contract increased $3.74/bbl or 5.8 percent as total US crude oil stocks decreased outside the market expectations. The spot Aug Brent contract increased by 2.87 percent or $2.11/bbl. The HO and RBOB crack spreads both appreciated versus WTI for the week even as refined product inventories were higher with refinery run rates increasing.
The widely followed 3-2-1 crack spread narrowed last week driven by the RBOB component. On the distillate fuel front the July Nymex HO contract increased for the week by 1.84 percent or $0.0384/gal after a draw in distillate fuel stocks. Gasoline prices increased after gasoline inventories increased on the week. The July Nymex gasoline price increased by 2.34 percent or $0.0473/gal this past week.
Nat Gas prices decreased after increasing during the previous week. The decrease in Nat Gas prices was primarily driven by a concern over growing US Nat Gas production. The spot July Nymex contract ended the trading week decreasing by 2.55 percent or $0.077/MMBtu.
On the financial front global equity markets were mostly higher on Friday but lower for the week. The EMI Index decreased after decreasing the previous week. The EMI Index was lower by 1.61 percent for the week with the year to date loss at 3.4 percent. Three of the ten bourses in the Index are still in positive territory for 2018 with China holding the worst performing spot in the Index with Australia in the top spot with a 4.2 percent gain for the year.
The lower value direction in global equity markets last week was a negative price driver for the oil complex. On the currency front the US dollar Index was lower for the week with the Yen/USD and the Euro/USD higher.
Overall the currency markets were a positive price driver for the oil complex last week.