Market Report & Analysis for 9/20/2018 Morning Edition
Morning Market Overview
WTI and the Brent contract closest to expiration on the Intercontinental Exchange settled Tuesday’s session at one-week highs, as the risk to global oil supply increased following a downed Russian reconnaissance plane in Syria, and ahead of a ministerial meeting in Algiers by the Organization of the Petroleum Exporting Countries and Russia. The rally ran roughshod over an escalating U.S.-China trade war that could stunt oil demand growth should global economies slow, and ahead of weekly inventory data due out Wednesday morning.
Oil futures rallied off technical support overnight on news a Russian aircraft was shot down by Syrian air defense, which was responding to an Israeli attack. Israel was targeting Iranian military assets in Syria, with Russia and Iran allied with Syrian President Bashar Assad in a brutal years-long civil war. Israel has vowed to not allow Iran to carve out a military presence in Syria, which borders Israel in the north. Moscow blamed Israel for the lost aircraft and death of 15 service members on board the plane. Israel blamed Syria for the loss of life, but expressed regret for the incident. Moscow and Tel Aviv have developed a close relationship during the Syrian civil war, and the incident doesn’t appear to have changed that dynamic.
The incident also comes ahead of the weekend OPEC ministerial meeting when reports indicate Russia will seek a 1.0 million bpd boost in production. Separately, the market shrugged despite new tariffs imposed in the U.S.-China trade war. Monday night, Washington slapped $200 billion in tariffs on imported Chinese goods that takes effect Sept. 24, with a separate $50 billion in tariffs having taken effect in July.
Today, Beijing responded, placing $60 billion in tariffs on U.S. imports. The Shanghai Composite Index increased, up 1.8% at 2,700 this afternoon after falling to a nearly four-year low on Monday, with the Dow Jones Industrial Average rallying more than 200 points to 26,285. The U.S. dollar did slide, tumbling to a nearly eight-week low in index trading, with a weaker dollar lending upside support for West Texas Intermediate futures.
