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Trend:

Rotterdam: $ 2 lower
Singapore: $ 9 lower
US Gulf: $ 3 higher

Happy hour with uncertainty cocktails (Brent: $102.7)

After yesterday's tumble in all asset classes, including oil, market participants are still pondering to make sense of Bernanke's statement. On the one hand he lowered GDP growth forecasts, but on the other hand he lowered unemployment as well. Two usually negatively correlated projections. Throw in the hints that Bernake will end his term in January 2014, and you’ve got happy hour with uncertainty cocktails. This summer looks to be un-seasonally volatile, and we strongly advise clients to take advantage of any outliers in oil prices.

In Iraq, oil output targets have been adjusted downward in 2017 from 12 to 9 mbpd. The new target is still in the high end of the likely outcome only 4 years from now. Furthermore, foreign oil companies have been asked by the government to lower outpuit, in order to let the oil reserves last longer.

Recommendation

We advise consumers to secure hedges in any setback towards 100-102, should it suit your budgets. The break-even price for many OPEC countries, including Saudi Arabia, is just shy of $100. Furthermore, shale oil break-even prices and rising geopolitical tensions in oil producing/transporting countries poses a medium term upward risk for oil prices.