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Trends

Rotterdam: $ 3 higher
Singapore: $ 5 higher
US Gulf: $ 1 higher

OPEC cut crude supply (Brent: $115.9)

As has been the case for the past two months OPEC (read: Saudi Arabia) has cut production. On average for January the organization has produced surprisingly close to its official target of 30 mbpd (30.5 mbpd for Jan13). Apparently, lower demand is the cause of the reduction; more likely however is the shale oil boom in America which has given the world an extra 750,000 bpd in supply. With the Saudi Arabian cash commitments to cool any attempts of the Arab spring in the Kingdom, we estimate further room for a cut of 5-600,000 bpd. That is however depending on oil prices at current levels. Overall cutbacks in crude supply will naturally bouy prices.

Later today volatility in prices should be expected, due to a number of reasons:

a) It is Friday, and thus many short term traders will go on weekend, with as square positions as possible.
b) It is the first trading day in the new month, and thus spur opposite interests for the medium term traders.
c) At 14.30 CET the important U.S. unemployment figures are published (non-farm payroll, 160k, and unemployment rate, 7.8%).
d) At 16.00 CET the pulse of U.S. business will be published, (ISM: 50.6). Above 50 is positive, below negative.

Recommendation:

Prices are generally bullish at the moment. The postponed U.S. debt ceiling debate to 19 May, the cut in OPEC supply, and the continued unrest in the Middle East (Syra, nuclear Iran, etc.) are all supporting prices. Consumers are advised to use dips in the market to partly establish hedges.