Market Report & Analysis for 8/23/2018 Morning Edition

Morning Market Overview

The oil complex strengthened Tuesday as the spot Nymex Sep contract expired. Prices rose across the board in the pre-inventory report cycle trading session. The main driver today was the focus moving toward the potential loss of production from Iran when the sanctions are implement in early November with China seemingly the only major buyer of Iranian crude oil still holding out.

The Sep contract expired in a strong backwardation compared to the newly anointed spot October contract or a supportive sign for the market. Further supporting prices was a strong decline in the US dollar versus most currency pairs and rising US equity prices in the US and several other major bourses around the world. The financial markets are slightly relaxed as negotiations between China and US trade teams are schedule to underway this week. The view is that a path to a resolution now has an increased chance of success. On the financial front global equity markets were mixed.

The EMI Index was higher for six of the ten bourses in the Index. The EMI Index decreased by 0.53 percent on the day (mostly driven by a large decline in Brazil) with the year to date loss at 1.5 percent. Four 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 5.2 percent gain for the year. The negative value direction in global equity markets was a negative price driver for the oil complex.

On the currency front the US dollar Index is 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.