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Fuel oil trend

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

Awaiting the FED (Brent: $107.6)

Markets are likely to trade mostly sideways today. The latest statement of the FED will be published at 20.00 CET, and markets will be extra vigilant for any signs of further tapering than the already announced cut in QE3 (Instead of printing additional $85bn every month, the target is now at $75bn). We do not see any major changes in the outlook for QE3. The additional $75bn printed every month is likely to continue without much change at least until the next FED meeting (There will be a change of chairman by then end of the month. Ben Bernanke will step down and be replaced by current vice-woman Janet Yellen). The oil markets reaction to tonight’s statement remains to be seen, but we believe it will be mostly a non-event, but with a small chance of a minor spike in prices.

In Libya various independent, and heavily armed, tribal groups have vowed to begin exports from some of the terminal they currently control. It could mean a little more than 300,000 bpd extra in export from Libya, bringing the total to approximately 600,000 bpd. Though still far from the pre-war levels of 1.6mbpd, it represents a step in the right direction for Libya export, but whether the many different groups can continue to agree with the Tripoli government remains to be seen. We expect multiple hiccups along the way with subsequent drop in export.

Recommendation

We expect the present dip in oil prices to be short term and the level could be a buying opportunity for oil consumers if it fits your hedging strategy. We expect major support around $104-104.5 but currently the upside looks to have more potential than the downside, especially for lighter products.