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Trend:

Rotterdam: $ 1 lower
Singapore: $ 3 higher
US Gulf: $ 1 lower

Libyan oil exports on the way back to pre-war levels (Brent: $107.3)

Today the meeting of US central bank members (FOMC) will team up to discuss the outlook for potential tapering of the $85bn per month of QE that's currently in effect. Reduced QE is likely to have a short term bearish effect on oil prices, whereas long-term fundamentals will kick in and support prices in the three-digit area.

In Libya, exports are, according to oil minister al-Arusi, almost back to pre-war levels. Current output should be just shy of 1.5mbpd, whereas the pre-war level was approximately 1.6mbpd. Protests continue outside oil facilities, but currently do not affect neither production nor exports.

It is not more than a few weeks ago that security forces shut down a third of the country's oil production (0.5mbpd) due to disputes over pay. Therefore it is well worth remembering that Libya might not be fully out of the woods just yet. The high quality of Libya crude makes a production/export halt hard to replace, hence the major spike during the 2011 war to overthrow Qaddaffi.

Recommendation

We recommend clients to use the current setback to enter hedges, should it suit your budgets. In the current unstable geopolitical environment prices seem to be aiming higher. We estimate $112 to be the next short term price target, though a smaller setback to $106 is far from unlikely.