Yesterday Iran and European officials meet in Istanbul to prepare for another possible round of talks on Iran's nuclear program. The meeting was at the deputy negotiator level but the chief negotiators from both sides are scheduled to be in contact very shortly to talk more about a full blown negotiating meeting. Not much information was released from this meeting. Simply put if another round of talks are in fact scheduled it would push the threat of a supply risk in the Middle East forward and would thus be somewhat bearish for oil. On the other hand if no new negotiations are scheduled it will raise the geopolitical risk as well as the risk of Israel taking some form of military action against Iran with the risk of oil flow out of the region starting to slow. It is time once again to put this issues back on the radar to see what evolves in the short term insofar as more negotiations.
Global equity markets have been under intense selling pressure all week as shown in the EMI Global Equity Index table below. The EMI Index is now lower by 2.8% for the week resulting in the year to date loss of the Index widening to 2.7%. The Index is now back to the level it was at in mid- May. Six of the ten bourses in the Index are now in negative territory for the year. Germany remains on top of the leader board as this export oriented country continues to enjoy the benefits of the falling euro from the perspective of making its exports even more competitive. The rest of the European bourses are all in negative territory for the year. The global equity markets are a negative price driver for oil and the broader commodity complex.
The API report showed a surprise build in crude oil stocks and larger than expected builds in both distillate fuel and gasoline stocks. The API reported a build (of about 1.3 million barrels) in crude oil stocks versus an expectation for a modest decline as crude oil imports increased and even as refinery run rates increased strongly by 1.9%. The API reported a strong build in distillate stocks. They also reported a large build in gasoline stocks versus an expectation for a smaller build in gasoline inventories.