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Fuel oil trend

Rotterdam: $ 5 higher. Singapore: $ 9 higher. US Gulf: $ 3 higher.

Oil prices up on supply worries and strong macro data (Brent: $105.6)

Brent recovered more than $2/bbl on Friday after strong macro data and technical buying.

Various news items came out over the weekend supporting oil prices. Firstly, talks between Iran and six world powers ended without an agreement on Iran’s nuclear programme. There will be another round of negotiations on 20 November. Secondly, Saudi Arabia cut its output in October from 10.1 mio. bpd to 9.75 mio. bpd. OPEC will meet in Vienna on 4 December to decide its output target. Thirdly, Libya seems further from restoring order in the country, on Sunday an autonomy group announced the formation of a regional oil firm that would challenge the government.

Surprise increase in U.S. jobs data on Friday – 204,000 new jobs in October, but jobless rate inched slightly higher to 7.3%. The timing of Fed’s tapering its bond-buying programme remains uncertain.

Recommendation

A pull-back to $106.5-106.7 is a strong possibility after the last days' events and data. Failure to break above will trigger consolidation between $103.5 and $106.5 - before further direction is signaled. We advise clients to take advantage of year-end deleveraging and cover some positions at these numbers.