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Trends

Rotterdam: $1 higher
Singapore: $4 lower
US Gulf: $4 lower

Nigearian oil production to pick up (Brent: $107.6)

Pipeline damages during an attempted oil theft have been repaired and production sites are coming back online after a flooding. A record production of 2.2 mbpd is estimated for December. In combination with a rebound in production at the Buzzard field in the North Sea back, this will put some pressure on prices. What pulls the oil price in the other direction is the continued drop in export out of Iran. Deputy Oil Minister Ahmad Ghalebani: "We will cut our export by 1 million bpd….within the next few months". The expected drop might have more to do with the EU/US sanctions than Iran scaling back on export.

Later today (14.30 CET), the U.S. GDP figures will be out. Market consensus is approximately 2.0%. Major deviations would have a direct impact on oil prices.

Prices are not much above the key level 100 usd/bbl. If we get anywhere near two-digit Brent prices, we expect Saudi Arabia to start stepping up the rhetoric and scaling back on production to support prices. The break-even price of OPEC varies highly (65-130) between the individual countries. However the key player Saudi Arabia has a break-even point just around 100, and as such is expected to defend that level.

Recommendation

Lower oil prices are considered a buying opportunity and we advise our clients to take advantage of any dips in the market. The supply-demand situation is walking a tightrope, and the geopolitical nuclear wildcard in the Middle East remains. Given the scarce inventory levels, and the ongoing maintenance season for refineries, consumers of distillates are strongly advised to consider hedging for the upcoming winter.