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Trend:

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

OPEC meeting later this month (Brent: $102.9)

OPEC meets up in Vienna later this month. Not surprisingly, Iran will seek a cut to the OPEC output ceiling currently at 30 mbpd. The country has been hit hard on oil revenues due to EU/US sanctions. Given the big rise in break-even prices for many of OPEC’s members, due to expensive measures following the Arab spring, combined with higher shale oil output from the U.S. - we see a slight chance that the official output ceiling is lowered. The break-even prices for key-producer, Saudi Arabia, is estimated to have increased to just shy of $100 per barrel. Any sustained drop below should spur an immediate cutback in production by the Kingdom.

In Germany, inflation figures came out in line with expectations (CPI final YoY for April: 1.2%), which leaves some room for the ECB to engage in extraordinary measure (aka QE à la ECB-style). As central banks are dictating the price of all risky assets at the moment, keeping a close eye on macro figures will give important hints of the future direction of oil prices.

Recommendation

Due to increased geopolitical concerns, we expect oil prices to stay above $100 on average. Furthermore, given the multiple factors; Break-even price of OPEC and shale oil extractions – the big divergence between equities and oil, we recommend consumers to secure hedges should it suit your budget.