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Trends

Rotterdam: $9 lower
Singapore: $9 lower
US Gulf: $7 lower

China vs. Bernanke. Mr. Market rules: 0-1 (Brent: $98.0)

The lowering of the official Chinese lending rate by 25 bps (to 6.31%), sparked a rally in oil prices all the way to 102.5, before prices took a beating when chairman of the FED Ben Bernanke did not conclude anything on QE3. Market hopes had been raised throughout the day as FED member Yellen was quoted of saying additional stimulus was needed in case the economy deteriorated. As we wrote in yesterday's briefing, the US economy was still moving forward, albeit at a slower pace, and thus the need for stimulus did not seem imminent. Yellen is a perma-dove, and has been speaking of more monetary stimulus for several years. Therefore one should be careful to interpret her remarks as the consensus of the FED.

Headlines on the US debt ceiling have started to emerge. The market eye will surely start focusing more intensely on the US debt during the summer. During the presidential election Obama and Romney will surely battle on the economy and debt issue. Volatility is thus not expected to slow during late summer and early autumn.

Recommendation

A lot of volatility is scheduled ahead. In a long term perspective and given Saudi Arabia “target level” of $100 we see the current levels as favorable from a consumer point of view. The recent days upwards moves have been with high turnover, indicating that a bottom formation is building at current levels. Given the backwardation we recommend consumers to enter hedges should it suit your budget.