Market Report & Analysis for 6/28/2018 Morning Edition

Morning Market Overview

Oil prices rallied Tuesday recovering all of Monday’s losses as geopolitics moved front and center on the day. The US is starting to put pressure on Iran as it prods its allies to stop importing Iranian crude oil. The US wants all allies to stop importing Iranian crude oil by November and it will not grant any waivers to its sanctions.

Iran’s crude oil exports are already starting to decline with Reuter’s reporting Iranian production declining around 500,000 bpd from the May level. Further supporting crude oil prices is the evolving unplanned shut down of Canadian Syncrude of between 350,000 to 400,000 bpd for at least the month of July. This will result in Cushing inventories decreasing from a level that is already well below the five-year average and closer to the 5-year low for this time of the year. The market sentiment is once again changing toward a more bullish price viewpoint as the Iranian and Canadian production losses are almost as much as the planned OPEC/non-OPEC increases in production without considering any further declines from Venezuela.

On the financial front global equity markets were mixed as market players continue to be uneasy over all the US and China tariff discussions. The EMI Index was slightly higher with losses in five of the ten bourses in the Index. The EMI Index was higher by 0.12 percent on the day with the year to date loss at 4 percent. Only two of the ten bourses in the Index are still in positive territory for 2018 with China still in the worst performing spot in the Index with Australia in the top spot with a 3.7 percent gain for the year.

The slightly positive value direction in global equity markets was a neutral price driver for the oil complex.

On the currency front the US dollar Index is 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.