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Trends

Rotterdam: $ 8 higher
Singapore: $ 5 higher
US Gulf: $ 1 lower

There’s something brewing in the land of oil and equities (Brent: $110.8).

As we’ve described in a briefing last month there is a very big divergence between equities and oil prices. While equities have been racing ahead, oil has been more or less "stable". The phenomenon has the spread between the two approaching record levels, last seen in 2000 and 2008. One of two things is therefore HIGHLY likely to happen within the coming weeks. Either oil prices increase or equities take a dive. While the outcome is still unknown, the recent rebound in oil has given a small hint as to what is about to happen. We strongly advise clients to consider the short term upside risk.

OPEC output drops - again

Total OPEC output dropped by almost 75,000 bpd to 30.5 mbpd in March. The main drop in production was due to a 270,000 bpd decrease in output from Nigeria, which was partly countered by an increase by Iraq. Oil theft in Nigeria has at some pipelines reached 60 pct. flow (!). Not a sustainable situation for very much longer. The high quality oil from Nigeria will be dearly missed if oil companies deem it unsustainable to keep loosing more than half their production.

Recommendation

We highly recommend consumers to keep an eye out for a sharp upwards move the coming weeks. History tells us that the divergence in the financials markets should not be ignored! The two geopolitical wildcards Venezuela an Iran could be the trigger for rising oil prices.