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Market Briefing
Thorbjoern Bak Jensen, A/S Global Risk Management Ltd.
11 Aug 2010 09:33 GMT





Thorbjoern Bak Jensen, Global Risk Management Oil down after risk aversion sell-off (Brent: $78.9)

Trends

Rotterdam (ARA) fuel oil - US$3 lower

Singapore fuel oil - US$5 lower

US Gulf - US$2 lower

FED signals soft quantitative easing

Not expecting a major monetary policy shift from the FED, investors sold off risky assets ahead of yesterday's FOMC meeting. Dollar strengthened to $1.30/EUR and oil pulled back below $80/barrel. The FED, however, did surprise the markets and announced a long-term government debt buy-back program with maturing securities it currently holds. By introducing "softer" quantitative easing, the FED buys time to evaluate more macro data before deciding to implement further drastic measures.

China keeps cooling

Chinese July industrial output, retail sales and urban investment showed a slight decline year-on-year, pointing to a cooling economy. However, consumer price index, a good indicator of future inflation, came out to be higher than 3% which may concern the officials in the short-term.

Cyclonic activity increases

Number of active tropical depressions starts to increase as the Atlantic gets warmer towards the end of summer. A new depression has formed in the Gulf of Mexico and is expected to move northwest towards BP's spill site and the Louisiana coast.

Today's important numbers include US international trade and federal budget figures.

Recommendation

Brent is currently testing the 100-day moving average of $78.7/barrel on the downside and $/EUR broke below an important support at $1.31/EUR. Prices might pull back further towards $76/barrel if risk aversion sell-off continues. We recommend selling at current levels and wait for market dips to cover future exposure.

Release: API oil data (Consensus)

* Crude: -2,187,000 barrels (-1,900,000)
* Distillates: 2,286,000 barrels (1,400,000)
* Gasoline: -1,536,000 barrels (200,000)
* Refinery utilization: -2.5% (-0.4)


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Company: A/S Global Risk Management Ltd.

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