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Trend:

Rotterdam: $ 7 higher
Singapore: $ 6 higher
US Gulf: $ 2 higher

Strong dollar affects oil prices (Brent: $101.5)

Global markets have been pricing in the impending stimulus tapering and the correction has seen massive outflows of funds back into the US dollar, seeing it rally to a three-week high. The outlook for the dollar continues to be strong and will make oil more expensive in other currencies.

Middle East

Qatar Emir Sheikh Hamad bin Khalifa Al Thani is to hand over the reins of the nation to Crown Prince Sheikh Tamim. No significant change in policies is foreseen in the near future. Qatar is the world’s largest exporter of liquefied natural gas and has considerable influence in the Middle East, allegedly supporting the Syrian rebels against the Assad regime. Regarding Syria: reports claim that chemical weapons were used against the Syrian opposition just yesterday. This might prompt the US and the opposition backers to step up their military support. The current deadlock between US and Russia would however have to be resolved before any military hardware is deployed.

Summer Demand

A hotter summer is expected in Japan the coming three months. Since the Fukushima incident, nearly all the country’s nuclear reactors are now offline and the third largest oil consumer will most likely step up its oil and gas demands for power generation.

Data Watch

US data for durable goods (at 14.30CET) and new home sales (at 16.00 CET) will be closely monitored by markets today. They will provide hints as to whether the economy is on track to the kind of recovery the Fed expects before it starts scaling QE3. Very strong numbers would be needed for the QE3 to be scaled back already in September. Read more on our QE3-tapering outlook in the quarterly report published on Monday @08.00 CET.

Recommendation

We advise consumers to secure hedges during market dips, 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. Spillover effect from the capital markets are currently weighing on prices. The mood of capital markets can however change 180 degress with very short notice (e.g. during a QE4 or China firing a money bazooka).