---

Trends

Rotterdam: $ 4 lower
Singapore: $ 2 lower
US Gulf: $ 2 higher

OPEC to cut production. FED to end QE3 in 2013? (Brent: $111.50)

In a combination of supply increasing from non-OPEC, and sluggish demand expectations, OPEC will be cutting crude shipments by approximately 1% in January compared to Dec12. In reality Saudi Arabia will be doing the cut-backs whilst the rest of OPEC will continue to run the pumping stations at near-full capacity. OPEC supply is expectd to decrease by 250,000 bpd in Jan13.

The Minutes from FOMC showed a change in the voting members' stance regarding continued direct asset purchase (aka QE) .If QE3 ($85bn/mth) continues its run throughout 2013, it will add another trillion dollars to the already booming FED balance sheet. Currently, the FED is split right down the middle wheter to end QE3 during 2013. If the markets deem it too early for the FED to end the bond buying program, it could spell trouble for all risky assets, including oil prices. We will vigilantly follow any developments and keep our readers informed.

Recommendation

With the potential FED policy change on one side, and cutback in OPEC supply on the other oil prices could be in for a bumby road in the months ahead. Generally, clients are advised to take advantage of any outliers in prices, before the pendulum swings back in the other direction.