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Trends

Rotterdam: $ 2 higher
Singapore: $ 3 higher
US Gulf: $ 1 higher

OPEC production drops, China macro jumps (Brent: $111.50)

Chinese macro data came out better than expected. The Chinese PMI at 50.5 came out just above the 50-mark, which signals rising expectations for further growth. We continue to expect China to continue at cruising speed of 7-8% GDP growth. Even if growth slows to 6% it can hardly be considered full stop. The Chinese demand for oil has decreased slighty on a month-by-month basis as the strategic storage facilities have been filled up, but as new facilities are already scheduled to be built, this factor should start playing a role again already next year. Regular Chinese oil demand for consumption has not showed any major signs of a slowdown.

OPEC production drops

OPEC production dropped +300,000 bpd from October to November. The vast majority due to Nigerian (-190kbpd) pipeline issues (damages from oil theft/sabotage), and Saudi Arabia slashing production with another 100,000 bpd. As the crude oil market seems fairly balanced, there should be room for further production cuts in Saudi Arabia. On the product side, especially diesel, refineries are running as much as possible before the full winter maintenance season kicks in. Should the current weather in Northern Europe be a benchmark for the next couple of months, there would be soe real pressure on diesel/heating oil ahead.

Recommendation

We continue to advise consumers to establish hedges during market dips. Oil prices immunity to debt news have increased a lot during the financial crisis, whereas the geopolitical risk premium remain the major wild card in the weeks and months to come. Disstilate inventories remain at multi year lows. A colder-than-average winter, would significantly increase the chance of higher product prices.