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Trends

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

Interesting days ahead! (Brent: $114.7)

Tomorrow, the German High Court is scheduled to rule on whether Germany’s contribution to the many inter-European bailout packages is unconstitutional. Whilst expectations are that the ruling will favour continued German participation, any cracks in Germany’s support to the Euro project will send significant ripple effects throughout the oil market.

The two-day FED meeting will begin tomorrow, and QE3 expectations are on the rise (again). Expectations have been partly boosted by Friday’s weaker than expected non-farm payroll (96,000 vs. 125,000 expected). Whilst the unemployment rate fell from 8.3% to 8.1%, it was mainly due to people leaving the workforce.

Saudi Arabia’s oil minister Al-Naimi vows to curb rising oil prices

The oil rich Kingdom is already producing at a near multi-decade high (9.8 mbpd), and it will likely take more than words to keep a leash on speculative positions in the oil market. Probabilities that the U.S./U.K./France/etc. will engage in a "renegade" release from their strategic reserves are still on the table. However, we strongly advise consumers to secure hedges during a potential release. During the past release (2011) prices were higher only 4 trading days after the release.

Recommendation

We expect the oil price to be ranged between $111-116 for a couple of days still. A break out however looks increasingly likely. Upside bias is warranted, as the FED has the finger on the QE-trigger, in addition to a potential solution in Europe and a continued tense geopolitical situation in the Middle East.