Oil prices are mixed this morning after a larger than expected draw reported in last night’s API report along with another sizeable draw from Cushing (see below for more details). The spot WTI contract is hovering around its $101/bbl support level while the rest of the oil complex is in negative territory ahead of the upcoming EIA weekly oil inventory report later this morning.
The September Brent/WTI spread is also back on the defensive, narrowing about 7% since yesterday’s settle. The fact that Libyan oil production is reportedly holding steady at around the 500,000 bpd level in spite of the rising turmoil in the country, coupled with another large draw from Cushing of almost 1 million barrels has halted the short covering rally in the spread that has been in play since last Friday. The spread is still at a wider level than it was at prior to the start of the short covering rally on Friday.
New sanctions were instituted by Europe and the U.S. against Russia. The oil and European nat gas futures markets seem to be viewing the new sanctions with a yawn as Brent and UK nat gas futures on ICE remain in negative territory. The sanctions do not directly impact oil or nat gas flow from Russia in the short term and there is little chance Russia is going to retaliate by holding back energy supplies to Europe as it is Russia’s main revenue source. As such, there is a non-reaction in the energy market this morning.
Global equities are drifting lower ahead of today’s announcement of the outcome of the us Federal Reserve’s FOMC meeting. The market is basically expecting a status quo outcome. The EMI Global Equity Index has declined by 0.32 % over the last 24 hours with the year-to-date gain narrowing to 6.1%. Nine of the 10 bourses in the Index remain in positive territory, with Canada still holding the top spot and Japan the only bourse still in negative territory for 2014. Global equities have been a slight negative price driver for the oil complex over the last 24 hours.