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Trend:

Rotterdam: $ 7 lower
Singapore: $ 8 lower
US Gulf: $ 5 lower

FED to take away the punch bowl? (Brent: $104.4)

Chairman of the FED, Ben Bernanke, signalled yesterday evening that while the $85bn per month QE3 is to continue, it would "be appropriate to moderate the pace of purchases later this year" - however, only if the economic data would progress as the current FED forecasts project. (Unemployment down towards 6.5 pct. during 2014). If the economy develops as projected, QE3 would come to a complete stop by mid-2014. The risk that Bernanke potentially called last round, made many participants worry about the hangover after several years of FED-sponsored drinks. Whilst oil markets have retraced slightly, we see a much higher risk of a retracement in equities. Given the major divergence between equities and oil price, we assume a narrowing of the gap over the coming months, primarily due to equities dropping.

In Libya, production has rebounded from below 1 mbpd to almost 1.4mbpd. Stability in the security situation still seems far and away. Thus, we therefore do not see a stable production at pre-war levels at 1.6mbpd anytime soon.

The new pipeline from Iraq to Turkey - with an expected capacity of 1 mbpd in 2015 - is expected to be completed in September this year. It will mean a massive boost from the current 30,000 bpd, but as mentioned it will still be a while before major volumes are exported.

Recommendation:

We recommend clients to prepare for leaving $100 behind. Whilst prices are likely to trend sideways over the summer, underlying factors (geopolitical unrest, break-even price of OPEC/Saudi Arabia) are acting as fairly strong support.