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Fuel oil trend

Rotterdam: $ 0 lower. Singapore: $ 6 higher. US Gulf: $ 1 lower.

Huge draw on oil inventories, at least the private figures show (Brent: $112.8).

The private sponsored API figures for the U.S. oil inventories showed a huge draw on crude of 12.4 million barrels. Gasoline stocks showed a drop of nearly 120,000 barrels, whereas distillates reserves increased more than 0.5m barrels. If the figures are confirmed in today's official EIA it will likely support oil prices further in the short run. API has historically acted as a – well…let's just spill the beans – pretty horrible indicator for how the official stats came out the subsequent day. The past many weeks however it has been a fairly good proxy for the EIA figures.

OPEC meeting

Today the last OPEC meeting of the year kicks off in Vienna. The big theme of the meeting will be the US shale oil boom, and how to respons to the increasing North American oil production. The strained relationship between Iran and Saudi Arabia over the former's deal with U.S. on its nuclear program might throw some gravel into the discussion maschinery. Current OPEC output ceiling is set at 30mbpd (although production has been consistently above), and we do not expect any major changes to the official output target.

Recommendation

We are heading towards year-end and traders will likely start reducing positions - as they do every year. Lower liquidity is expected to set in over the next few weeks, and potential outliers in prices could emerge as a result (as it takes relatively smaller orders to impact market direction). Costumers are advised to take advantage of these outliers, as the market usually returns to “normal” shortly into the New Year.