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Financial markets affect oil prices; awaiting US oil production data

By A/S Global Risk Management.



Michael Poulson, Global Risk Management. Image credit: Global Risk Management


Updated on 03 Apr 2018 09:23 GMT

Financial markets affect oil prices; awaiting U.S. oil production data tonight and tomorrow

As the US last month imposed tariffs on steel and aluminum imports, the financial markets have gone through a risk-off period meaning that risky assets are sold. In general, the equities markets have been hurt on fears of these tariffs leading to a trade war between the US and China. Yesterday China responded with tariffs on 128 US products, which is an escalation of the situation resulting in large drops in the US equities markets. As these markets fell oil followed sending the Brent price down from a level about 70$ to a level about 67,5$. Currently Brent has gained half a dollar to trade just shy of 68$.

Looking at the oil fundamentals, US production is still on the rise and is now looking towards 10.5 million barrels produced a day, which is an increase of about 500 kbpd over the last 2 months. Counterweighing the production is that exports are still strong and especially to China despite the trade disputes between the two. Also, Friday's weekly oil rig count from Baker Hughes showed a decline in the number of active oil rigs of 7 to 797.

Later today the API is releasing their weekly inventory data. Today it is especially important to follow as it could give an indication of whether the fundamentals favour further lower prices or the 70$ level. Please note that; whatever the outcome is going to be, the financial markets are, though, assessed to be the primary price driver at the moment.



A/S Global Risk Management is a provider of customised hedging solutions for the management of price risk on fuel expenses. The company has offices in Denmark and Singapore. For further details about its risk management products and services, please call +45 88 38 00 00 or email hedging@global-riskmanagement.com.






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