SEB's crude oil comment: Long position best for day ahead
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TUESDAY 1 MARCH 2011 Gaddafi digs into his stronghold in Tripoli TECHNICAL ANALYSIS EUR/USD: bullish Brent crude: bullish COMMODITY RESEARCH Bjarne Schieldrop Chief Commodity Analyst +47 92 48 92 30 Filip Petersson Commodity Strategist +46 8 506 230 47 Yesterday Brent crude closed 0.30% lower at $111.8/b after having traded in a $111.25-114.5/b intraday range. Brent crude reached its intraday high during the Asian session on the news that demonstrations also had erupted in Oman. The demonstrations turned out to be of limited scope so far, but still resulted in the killing of two demonstrators clashing with the police. The overall threat to supply seemed less threatening yesterday as the Libyan rebels now holds control in a large part of the country. The head of Libya’s national oil company yesterday said that output was only down 50% rather than the 75% feared by the market. Repeated pledges from Saudi Arabia that it will ramp up production to meet any shortfalls due to the current production disruptions also helped to calm the market. Thus Brent crude traded down to about $112/b before mid-day European time where after it traded mostly sideways. Gaddafi has lost control over a large part of Libya, his army is fragmented, his earlier allies and friends around the globe are turning against him and his or Libya’s assets abroad are becoming out of reach (the US froze $30bn yesterday). Non the less, he still controls Tripoli (1.5 million inhabitants and a third of Libya’s population) and a 10000 strong army in the vicinity of Tripoli as well as a substantial amount of military hardware. He has lost the initiative, he is pressured from all fronts but he still has the capacity to inflict substantial damage on the population. Even if his day’s as a ruler are numbered he is likely to dig in and defend him selves in Tripoli and it could be an extended period before that situation is resolved. Statistical releases today include German unemployment rate (09:55), German manufacturing PMI (09:55), EU manufacturing PMI (10:00), EU CPI Estimate (11:00), US Construction spending (16:00), US ISM Manufacturing, US ISM Prices paid (16:00), Indicative US oil inventories by API (22:30) and US vehicle sales (23:00). This morning Brent crude is trading 0.5% higher at $112.4/b. Asian equities are well in the black with Nikkei up 1.2% and the MSCI AP equity index up 0.8% as a more stable oil price and yesterday’s higher US personal income is boosting optimism for continued recovery. US equity futures are 0.3% while the USD index is unchanged. Even though the supply concerns for Libya now are lower, the main concern has all the time been the fear of wider supply disruptions across the MENA region further down the road. Focus is directed towards the potential for uprisings and possible disruptions in Algeria (1.3 mb/p), Oman (0.9 mb/p), Iran (3.7 mb/d) and not the least Saudi Arabia (9 mb/d). In Iran opposition leaders have been arrested in order to avoid protests scheduled today. In Saudi Arabia, the 87 year old King Abdullah is not only showering his supporters with money, but even hosing them with money in order to avoid comparable uprisings. With geriatric and/or autocratic leaders versus young and informed populations in the above mentioned countries, a continued spreading of uprisings seems more likely than not. Bjarne Schieldrop, Chief Analyst Commodities To subscribe or unsubscribe, please e-mail SubscribeUnsubs [email protected]
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TUESDAY1 MARCH 2011Gaddafi digs into his stronghold in Tripoli
TECHNICALANALYSIS
EUR/USD: bullish Brent crude: bullish
COMMODITY
RESEARCH
Bjarne SchieldropChief CommodityAnalyst+47 92 48 92 30 Filip PeterssonCommodityStrategist+46 8 506 230 47
Yesterday Brent crude closed 0.30% lower at $111.8/b after having traded in a$111.25-114.5/b intraday range. Brent crude reached its intraday high during theAsian session on the news that demonstrations also had erupted in Oman. Thedemonstrations turned out to be of limited scope so far, but still resulted in the killingof two demonstrators clashing with the police. The overall threat to supply seemedless threatening yesterday as the Libyan rebels now holds control in a large part of the
country. The head of Libya’s national oil company yesterday said that output was onlydown 50% rather than the 75% feared by the market. Repeated pledges from SaudiArabia that it will ramp up production to meet any shortfalls due to the currentproduction disruptions also helped to calm the market. Thus Brent crude traded downto about $112/b before mid-day European time where after it traded mostly sideways.
Gaddafi has lost control over a large part of Libya, his army is fragmented, his earlier allies and friends around the globe are turning against him and his or Libya’s assetsabroad are becoming out of reach (the US froze $30bn yesterday). Non the less, hestill controls Tripoli (1.5 million inhabitants and a third of Libya’s population) and a10000 strong army in the vicinity of Tripoli as well as a substantial amount of militaryhardware. He has lost the initiative, he is pressured from all fronts but he still has thecapacity to inflict substantial damage on the population. Even if his day’s as a ruler
are numbered he is likely to dig in and defend him selves in Tripoli and it could be anextended period before that situation is resolved. Statistical releases today include German unemployment rate (09:55), Germanmanufacturing PMI (09:55), EU manufacturing PMI (10:00), EU CPI Estimate (11:00),US Construction spending (16:00), US ISM Manufacturing, US ISM Prices paid(16:00), Indicative US oil inventories by API (22:30) and US vehicle sales (23:00).
This morning Brent crude is trading 0.5% higher at $112.4/b. Asian equities are well inthe black with Nikkei up 1.2% and the MSCI AP equity index up 0.8% as a morestable oil price and yesterday’s higher US personal income is boosting optimism for continued recovery. US equity futures are 0.3% while the USD index is unchanged. Even though the supply concerns for Libya now are lower, the main concernhas all the time been the fear of wider supply disruptions across the MENAregion further down the road. Focus is directed towards the potential for uprisings and possible disruptions in Algeria (1.3 mb/p), Oman (0.9 mb/p), Iran(3.7 mb/d) and not the least Saudi Arabia (9 mb/d). In Iran opposition leadershave been arrested in order to avoid protests scheduled today. In Saudi Arabia,the 87 year old King Abdullah is not only showering his supporters with money,but even hosing them with money in order to avoid comparable uprisings. Withgeriatric and/or autocratic leaders versus young and informed populations inthe above mentioned countries, a continued spreading of uprisings seems morelikely than not. Bjarne Schieldrop, Chief Analyst Commodities
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Crude Oil Comment
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SEB Commodity Research
Bjarne Schieldrop, Chief Commodity [email protected]
+47 9248 9230
Filip Petersson, Commodity [email protected]
+46 8 506 230 47
Technical Analysis
Anders Söderberg, Chief Technical [email protected]
+46 8 506 230 21
Dag Müller, Technical [email protected]+46 8 506 231 29
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