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Trend:

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

Smaller-than-expected build in oil inventories (Brent: $103)

EIA released oil inventories for the week ended June 7. The increase of 2.5 million barrels was above analyst's consensus of a slight decrease in oil stockpiles. However, oil futures went up as this inventory data was much lower than the adjusted expectations after Tuesdays API report, which drove prices down when it showed an increase of 9 million barrels. Though the API acts as a proxy for the EIA figures, it obviously is not very consistent.

Jobless Claims & Retail Sales

Published later at 14.30 CET are the jobless claims and the US retail sales data for May. While we recognize that the market sentiment controls the direction of the short-term trend, we strongly reject any extreme market interpretations that a slight deviation from consensus would drastically move oil demand in any direction. The crucial point is if progressively good data in the next few months would prompt the Fed to taper its stimulus earlier.

Equities

Japanese equities tumbled a massive 6.4% on Thursday after the Bank of Japan stated that it will not inject further stimulus. This has affected the Asian markets and could possibly have a negative effect on the global equities market. Equities have been facing a drop the past month and the divergence between equities and oil that was mentioned previously has been closing.

Libya

The protests targeting Libyan oilfields and export ports have been affecting oil output. Libyan oil firms stated that output has fallen below 1 million bpd - this is far below the initial aim to increase it to pre-war levels of 1.7 million bpd. A prolonged drop in output could have a crippling effect on the state and the oil industry since Libya contains the fifth largest oil reserve in the world.

Recommendation

Currently we are in the lower part of the overall 100-120 range. Many factors point to strong support around the $100 level. Consumers are advised to partly hedge their exposure to mitigate any sudden spikes due to increased geopolitical unrest, or oil catching up to equity markets.