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Trends

Rotterdam: $ 4 higher
Singapore: $ 3 lower
US Gulf: $ 1 higher

Mixed oil news (Brent: $111.0)

No single major news has hit the oil market over the weekend. News in the small and medium segment include amongst others:

Speculators increase their net long positions to more than two days of global consumption (+19,000 contracts to 191,362). It is the biggest net long since Oct12 and would pose a risk to the downside if speculators/pension funds start to unwind their positions.

Higher-than-scheduled output from the North Sea. At Fortis (one of the benchmark oil field for the Brent notation) production has been above schedule. Hence cargo sailings have been moved forward a couple of days. However, given the statistics of the past decade, where North Sea production declined between 100-400,000 bpd every year (2002 = 6 mbpd, 2012 = 3 mbpd), it is unlikely that a goldilocks production scenario is just around the corner.

Seaway pipeline in the U.S. has started to pump 400,000 bpd away from the bottleneck in Cushing, Oklahoma, and to the U.S. Gulf. Pipeline capacity is expected to increase to 850,000 bpd in two years. The flow has already helped to narrow the spread between WTI-Brent to below $16.

On Wednesday, not only the inventory numbers are due, but there will also be a roll of the Brent contract. As there is currently backwardation in the global crude benchmark, a "technical" drop just shy of $1 is likely to occur. The technicality will not affect product prices.

Recommendation

Clients are advised to enter hedges during market outliers. For the past decade prices have only increased after the month of January. Currently option prices with short duration are - relatively - cheap compared to the past two years. Please contact your dedicated Oil Risk Manager for an in-depth discussion of your most advantegous opportunities in the oil market.