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Trends

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

FED sets target for unemployment (Brent: $109.3)

The Federal Reserve is aiming to keep rates low until unemployment drops from the current official 7.7% to 6.5%, under the condition that inflation doesn't rise above 2.5%. A target of 6.5% is rather ambitious considering the un-official un-employment rate is probably close to double of the official. Summa Summarum, unless inflation really picks up, we will see very accommodative rates from the U.S. central bank for years to come. Combined with several quantitative measures, the low yield environment will support oil prices in the years ahead. Furthermore the USD has dropped on the FED statement. A lower USD is historically very well correlated with increasing oil prices.

In other financial news, the European leaders agreed on ECB overseeing major banks in the Euro Zone. This will mean a coordinated and central oversight of the risk in systemic banks. Rules to be implemented and enforced from April 2014. Countries outside the EURO have the option to join, but currently not the obligation. Once up and running it should lower the overall risk within the Euro Zone and as such lower volatility on oil and equity prices a couple of years from now.

OPEC agreed on keeping its official output target at 30 mbpd, but as actual production has always been above, the signal value is more important than any official targets. An OPEC member expressed concern over the situation in Syria, which caused a small spike in oil prices, as the risk premium for a potential foreign interference increased.

Recommendation

As always, we advise consumers to establish hedges during market dips. Currently we are seeing on of these dips across the product range! Particularly heavy fuel prices have been slammed, providing good buying opportunities for consumers. The position squaring by speculators are giving favorable opportunities during this and next week.