Market Report & Analysis for 6/5/2018 Morning Edition

Oil prices struggled last week with the complex declining across the board except for a small gain in Brent. Oil prices declined for the second week in a row after talk started circulating around the media airwaves that Saudi Arabia and Russia seem to be willing to increase production to offset any potential decline in Iranian production once US sanctions hit as well as to mitigate any further deterioration in Venezuelan production as its economy spirals lower.

Further adding pressure to oil prices last week was a bearish weekly EIA oil inventory snapshot that showed total combined stocks of crude oil and refined products increased for the second week in a row.

The caution flag is flying as market participants begin to worry that the lengthy inventory destocking pattern could be coming to an end… especially if OPEC decided to increase production at the June 22 meeting. The externals were also a negative last week with global equities mostly lower and the US dollar Index finishing the week higher versus seven major currencies.

With tariffs looming and the G-7 Ministers issuing a rebuke of the US trade policy over the weekend uncertainty in the financial markets is likely to continue as the new trading week gets underway. Friday afternoon the latest Baker Hughes data hit the media airwaves reporting the number of rigs deployed to the US oil sector increased slightly last week by 2 rigs after increasing strongly during the previous week.

The latest rig data continues to support the overall uptrend in the US oil rig count remains. Total rigs deployed to the oil sector are higher by 128 or 17.5 percent year over year. Total US crude oil production is about 16 percent above where it was for the same week a year ago. This week’s production came in at 10.769 million bpd.