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Trends

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

The IEA sets U.S. oil production to surpass Saudi Arabia in 2020 (Brent: $108.3)

The International Energy Agency revised its latest forecast due to the shale oil theme. It now forecasts U.S. to produce a solid 11.1 mbps by 2020. Digging into the numbers, however, these barrels include a lot of LNG. A product the U.S. already has an abundant production of. We are convinced that shale oil will indeed have an impact on prices over the years, but we remain reluctant to join the choir, sing about infinite resources and cheap oil for all ahead. Firstly, the break even-price to extract shale oil lies somewhere between $70 and $95 per barrel. If prices dip below, production will drop - simple cost-benefit. Secondly, the fracking of shale to extract oil will likely encounter a series of environmental discussions, thereby postponing the process.

As previously discussed when concerning shale oil; even if the demand increases less than forecasted over the next decade shale oil will "only" help prevent a price spike. It is important to distinguish between a price drop, and the prevention of a major price spike.

Please note that due to Veterans Day this Monday the U.S. Inventories will be published tomorrow instead of today.

Recommendation

We continue to advise consumers to take advantage of any dips in the market. The supply situation is still walking a tightrope, and the geopolitical wildcard in the Middle East remains. Given the scarce inventory levels, and the ongoing maintenance season for refineries, consumers of diesel are strongly advised to consider hedging for the upcoming winter.