Oil market monthly december 2011

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Oil market monthly december 2011

  1. 1. 22/12/2011Oil Market Monthly December Commodities Research commodities_research@nordea.comDon’t despair if there’s no snow this Christmas, if there is no Chart 1: Brent Crude and WTI Crude 1st Month Futures (USD/bbl)icy waters to test your skates or your skis remain unwaxed in 130the booth – you won’t be bored because there’ll be a lot ofexciting news from the oil market! 120 110Better save on electricity, oil could prove expensive if thepolitical uncertainties in key oil-producing countries continue 100to escalate. Kazakhstan is new on the list of politically 90turbulent oil producers. In addition, there are growinguncertainties over Iran’s nuclear weapons programme and 80the EU’s potential oil embargo, the stability in Iraq after theUS forces are withdrawn, disputes between South and North 70Sudan over transit fees which could delay oil deliveries, 60persistent attacks on the Marib oil pipeline in Yemen and 21Dec10 21Mar11 21Jun11 21Sep11 21Dec11continuing violence in Syria. Brent 1M WTI 1MIn addition, the usual noise from less liquidity in the Source: BloombergChristmas week, closing of positions before the year-end,tax-related destocking as well as re-indexation of commodityindices in January can cause some short-term turbulence Table 1: Crude oil & product prices Date: 21/12/2011and choppy trading. For the last decade the average trading Crude Oil futures ($/bbl) 1M chg 1M % chg YTD chg YTD % chgvolume during the Christmas week has been 57% of the ICE Brent 1M 107.71 0.83 0.8% 12.96 13.7%average trading volume for the rest of the year. WTI 1M 98.67 1.75 1.8% 7.29 8.0% Swaps front month ($/t) 1M chg 1M % chg YTD chg YTD % chgWe would not be surprised if also this Christmas holiday will 1 3.5% Fuel Oil 612 11 1.8% 127 26.3%be riddled with breaking news events than can cause erratic 2 1% Fuel Oil 646 20 3.1% 157 32.2%movements in oil prices in the last trading week of the year. ICE Gasoil 909 -35 -3.7% 143 18.6%The average Brent oil price so far for Q4 is USD 109.1/barrel, 3 Jet Fuel 986 -32 -3.1% 153 18.4% Notes: 1) FOB Barges ARA, 2) FOB Cargoes NWE, 3) CIF Cargoes NWEAll eyes still on European financial crisis Source: BloombergMacroeconomic figures from the US, the world’s biggest oilconsumer, have surprised on the upside lately. This gave Chart 2: European Oil Product Cracks (USD/bbl)the oil market a breathing space before the next battle 25began on Tuesday this week. As feared, the House ofRepresentatives rejected the Senate bill that would extend, 20for two months, the payroll tax cuts and Federal long-term 15unemployment benefits. House Republicans called on the 10Senate to negotiate a bill that would extend these benefits 5for a full year. If Congress fails to agree on extending thepayroll tax cut and the emergency unemployment benefits 0past this month, it could trim US GDP by close to 1% as the 2Nov11 -5 16Nov11 30Nov11 14Dec11economy already struggles to recover and cope with the -10financial crisis in Europe. A 1% contraction in the US -15economy will cause a significant drop in oil demand by theworld’s biggest oil consumer. This will clearly have a -20negative effect on oil prices at the onset of next year. Fuel Oil 3.5% 0.1% Gasoil Jet FuelFailure by the US Congress to pass a deal before NewYear’s Day would likely prompt renewed risk-off trades, Notes: Front month swaps vs. ICE Brentsupporting US Treasuries and core European government Source: Bloombergbonds as well as the US dollar, but weaken oil prices, atleast in the near term. Commodities Research - AnalystsDecember weather looks to be warmer than normal in the Thina M. Saltvedt , Senior Analyst Macro/Oil +47 2248 7993US and Europe, but colder in Japan. The net effect on oil thina.margrethe.saltvedt@nordea.comdemand for the OECD regions is estimated to be a fall by Bjørnar Tonhaugen , Senior Analyst +47 2248 7959185k according to PIRA. Booming shale gas production inthe US and weaker economic conditions are expected to bjornar.tonhaugen@nordea.comsend natural gas prices in the US further Oil Market Monthly 1 of 16
  2. 2. 22/12/2011down when we move into 2012 (Chart 3). Low natural gas Chart 3: US natural gas prices decoupled from WTI crude oil pricesprices in the US relative to oil prices are expected to add tothe bearish outlook for heating oil demand this winter (Chart4).All eyes are still on the financial crisis in Europe as it hasbeen a big risk that banks would tighten credit supply tohouseholds and businesses – which in turn would create arisk of an even deeper recession and a bigger fall in oildemand. With Wednesday’s lending operation, the ECB hasdelivered an effective remedy against such a scenario –something which is probably far more important than therate cut of 25 bp made earlier this month. This should in ouropinion be a significant contribution to avert a deeper crisisis Europe and give a boost to the oil demand outlook andthe appetite for riskier assets such as oil, at least in theshort term. Source: Reuters EcoWinEconomic growth in China has slowed throughout the yearand recent indicators point to even weaker growth goingforward. Softer economic growth reduced oil demand Chart 4: US heating oil demand to remain lacklustregrowth to a meagre 0.7% in October according to the IEA. k barrels/d US High Sulfur Diesel Implied Demand, total Includes exports to other countriesTo avoid a sharp setback in economic growth, China has 1,800introduced smaller monetary policy easing steps and 1,600lowered the reserve requirement for banks. The reserve 1,400requirement cut supports our view that the authorities will dowhat is necessary to avoid a hard landing of the economy 1,200and ensure growth above 8% as we have in our forecast. 1,000Thus, more reserve requirement cuts and other fine-tuningmeasures are likely underway. This should support further 800growth in oil demand in 2012, but at a lower rate seen in 6002011. Early indications of oil demand for November point to 400an upswing compared to the month before when dieseldemand seems to have been an important driver, up 5.4% 200m/m (Chart 5). 0 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52According to our oil demand forecast for 2012 we expect a 5y range 2011 2010 5 year avgseasonal and cyclical slowdown in oil demand growth in H1 Source: Bloomberg2012 (Chart 6). For Q1 and Q2 we expect a call on OPEC(how much the oil market expects OPEC to produce tobalance the market) at 29.6m b/d and 29.1m b/d, Chart 5: China Diesel apparent demand rose strongly in Novemberrespectively. If OPEC keeps production strictly to its new China Diesel apparent demandproduction level at 30m b/d, we expect to see a stock build 3.8 Refinery output plus net product importsin the first half of 2012 (Chart 7). An increase in oil stocks 3.6would help the current situation after Libyan productioncuts, supply disruptions in other oil-producing areas and 3.4rising demand in emerging economies have led to a 3.2significant fall in OECD crude oil stocks this summer. At 3.0 mb/dWednesday’s meeting the cartel members expressed thatthey were happy with an oil price above USD 100/barrel. 2.8Therefore Saudi Arabia may also choose to reduce 2.6production to support prices in H1, which in turn will lead to 2.4a build in OPEC spare capacity. We expect a fall in oilprices to USD 107/barrel for Q1 and to USD 105/barrel for 2.2Q2. There is a risk that oil prices may fall below these levels 2.0depending on developments in the Euro-area debt situation Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Decand economic growth in large oil-consuming countries such 5y range 2011 2010 5 year avgas the US and China. Source: BloombergIn the second half of the year we expect to see an upswing Oil Market Monthly 2 of 16
  3. 3. 22/12/2011in oil demand, and the call on OPEC is expected to reach Chart 6: Nordea oil demand growth forecasts (baseline) Nordea Oil demand growth, y/y30.7m b/d in Q3 and 30.8m b/d in Q4. The call on OPEC 2.5will then rise above the cartel’s current production level. If 2.1we are right and OPEC keeps production strictly to its new 2level, we will see a tightening of the supply/demand balancewhich in turn will lead to an increase in oil prices. We expect 1.5 1.4 1.2oil prices to rebound to USD 110/barrel in Q3 and USD 1.0 1 mb/d112/barrel in Q4. OPEC does not mention a scenario with afaster-than-expected tightening of the supply/demand 0.5 0.4 0.4 0.4 0.5 1.8balance which in turn may boost oil prices. High oil prices 0.3will clearly put pressure on the world economy. And with the 0 1.1 1.1 0.8 1.2 1.3 2.0 1.8risk of the world economy falling into a maelstrom, OPEC -0.7 -0.4 -0.7 -0.3 -0.6 -0.5 -0.8risks prolonging the period of economic contraction and -0.5thereby the demand for oil and oil products. If oil pricesmove too high, we must hope for Saudi Arabia to “cheat” -1 1Q2011 2Q2011 3Q2011 4Q2011 1Q2012 2Q2012 3Q2012 4Q2012and push total production above 30m b/d like the country OECD Non-OECD Total demanddid in June 2008 when oil prices almost reached USD150/barrel. Source: IEA, Nordea MarketsWe expect OPEC’s new production level will lead to aweakening of the supply/demand balance in H1 2012, Chart 7: OPECs new production ceiling relative to expected 2012 "call"leading to a weaker oil price outlook in this period. In OPEC crude oil production vs Call-on-OPEC-crude 34contrast, if OPEC decides to keep the production levelunchanged at the meeting on 14 June, we expect to see a 32tightening of the market balance in H2 which in turn should 30trigger an upswing in oil prices in the second half of Libyanext year. 28 mb/d 26Increasing risk of supply outagesWe have not made any changes to our supply-side 24 Saudiprojection since the oil price update from 1 December. 22Although we would like to underline the increasing risk ofsupply-side outages in the vital oil-producing countries 20mentioned below and the upward pressure on prices a Rest-OPECproduction disturbance or even the fear of a disturbance 18 Jan08 Sep08 May09 Jan10 Sep10 May11 Jan12 Sep12may cause (Chart 8). OPECs new production ceiling Nordea Call-on-OPEC (quarterly)As Libyan oil production is gradually returning to the market, Source: IEA, Nordea Marketsa new source of uncertainty has emerged. Kazakhstan, thesecond-largest oil producer among the former Sovietrepublics after Russia and controlling the second-largest oil Chart 8: Oil prices* have been strongly influenced by geopolitical eventsreserves in the region, has been hit by a wave of unrest.With the production halt in Libya fresh in mind, a series ofdeadly clashes between police and oil workers has raisedconcern over diminishing production/exports in the centralAsian nation.The turbulence has been building since last summer whenKazMunaigas, the national oil company, sacked hundredsof striking oil workers. If the turbulence continues toescalate, the oil companies may consider evacuating oilworkers as the security may be threatened, which in turnmay lead to productions stoppages and a cut in crudeexports to the key European and Chinese markets. Kazakhoil and gas production is expected to climb significantly overthe next decade and the country is aiming to become one ofthe world’s top oil exporters (EIA). Last year Kazakhstan *Brent crude front month futures priceproduced around 1.7m b/d, just above the volume Libya Source: Reuters EcoWinproduced before the uprising started. Around 85% of this oilwas exported mainly via pipelines to Europe and Oil Market Monthly 3 of 16
  4. 4. 22/12/2011China. We would not be surprised to see oil prices or the Chart 9: Imports of Iranian crude and percentage of total oil demandrisk premium rising by at least USD 5-10/barrel if theturbulence shuts in oil production in Kazakhstan.Iran is flexing its muscles againIran is flexing its muscles as EU foreign ministers havestarted talks to broaden existing sanctions against Iran andto impose an oil embargo on the country unless Tehransoon halts its highly provocative nuclear enrichmentprogramme. The fierce discussion about the purpose of theprogramme has been going on for decades, but the talkshave become more hostile recently after the InternationalAtomic Energy Agency (IAEA) released a report thatdetailed extensive evidence that Iran has been developingthe technologies used in producing nuclear bombs.An EU oil embargo will clearly have an effect on theEuropean/global oil balance (Chart 9), oil prices and Source: IEAincrease the political tension, thereby threatening stability inthe oil-rich region. Increasing risk of production disruptionscan lead to a significant upward pressure on oil prices.The final decision about an oil embargo has been delayedtill January to give the EU members importing Iranian oiltime to find alternative suppliers, but rumours andspeculations about the outcome will add to the political riskpremium.Third generation Kim poses no immediate threat to theoil marketThe implication, if any, for the oil market of Kim Jong-euntaking over as the leader of North Korea after his father KimJong-il is still uncertain. Long-term caution will persist aslong as Kim Jong-eun’s new regime is unsettled. There is arisk that the North Korean regime may collapse during thetransition of power and the nuclear arms may fall into thewrong hands. Some have also been speculating that thenew leader may be tempted to show military strength byengaging in provocative acts, another nuclear test or militaryaction. This is a particular fear for South Korea after lastyear when Pyongyang killed several people by torpedoing aSouth Korean warship and bombarding an island.Both North and South Korea are wholly dependent on oilimports as the countries have no proven domestic oilreserves. While oil accounts for around 6% of total NorthKorean primary energy consumption, petroleum productscover around 45% of the South Korean primary energyconsumption. In 2008, South Korea was the world’s fifth-largest crude oil importer. The Middle East supplies SouthKorea with approximately three-quarters of the country’s oilimports totalling 3.1m b/d. South Korea is home to three ofthe ten largest oil refineries in the world with significantexports to China, Singapore and Indonesia. Clearly anescalation of the conflict between the two countries on theKorean peninsula may cause delays to the shipment ofcrude oil and oil products in the area, thus affecting the priceof oil and oil products. Oil Market Monthly 4 of 16
  5. 5. 22/12/2011 Chart 10: Stable long term prices, softening short term pricesCrude price and forward curve outlook ICE Brent front month vs. 5-year deferred priceBrent front month futures prices averaged USD 130110.50/barrel in November and have thus far in Q4averaged USD 109.20/barrel, just shy of our price forecast 120of USD 110/barrel. Front month prices have most recently 110trended below this average, while long-dated oil prices, eg5-year deferred Brent futures, have remained more stable USD/bbl 100around the USD 90/barrel mark. The spread betweenprompt and deferred prices has therefore eased since our 90last report, with the 1M-5Y time spread now around USD15/barrel from the recent high of USD 21/barrel in late 80November (Chart 10). The easing of the so-called 70“backwardation” in the Brent forward curve corresponds wellwith the weakening of the supply-demand balance in recent 60weeks. According to preliminary inventory data from the IEA 22Dec10 22Feb11 22Apr11 22Jun11 22Aug11 22Oct11for November, total OECD commercial oil stocks built Brent 1M Brent 5Ycounter-seasonally by 7m barrels versus the 5-year averagedraw of 15m barrels (Chart 11). The stock build was Source: Bloombergconcentrated in petrol and fuel oil, while OECD crude oilstocks edged down by 0.8m barrels, the sixth consecutivemonthly drop. Oil supply increased strongly in November, Chart 11: OECD total oil inventories have continued to fall sharplytaking OPEC crude supply close to our call on OPEC crude OECD Total oil stocks 2,850for Q4 of 31m b/d. We expect that the oil inventory trend hasturned with expected stock builds in the next two quarters, 2,800even if OPEC reduces production down to its new “ceiling” 2,750of 30m b/d (see Chart 7). This will in all likelihood result in a 2,700weakening of crude oil time spreads, ie prompt crude priceswill continue to soften relative to long-dated prices. 2,650 mb 2,600Product price and crack spreads outlook IEA November estimate 2,550The reversal of the trend in product prices and cracksdescribed in our latest Oil Market Monthly November seems 2,500to have started already. Thus far in December, light product 2,450cracks (ie petrol) have started to improve from depressedlevels, while middle distillate cracks (ie gasoil/diesel and jet 2,400 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Decfuel) have continued to soften from October’s strong levels. 5Y Range 2011 2010 5Y AverageHeavy fuel oil cracks have remained firm, but also softenedfrom the October highs, as crude runs have been cut due to Source: IEAgenerally weak refining margins. We continue to expect thetrend of weak light product cracks and strong middle-heavycracks to continue to reverse over the next few months Chart 12: Light prod. weakness, middle/heavy prod. strength to reverse(Chart 12). European Oil Product Crack Spreads Spread to Dated Brent 30Gasoil/diesel outlookGasoil (diesel and heating oil) demand still continues to 20show the most strength among the major oil products. Theseasonal demand increase for heating oil in the West has 10been slightly weaker than normal due to mostly warmer USD/bblweather thus far this heating season. Supply has improved 0significantly since October, when crack spreads for North- 27Jan11 27Mar11 27May11 27Jul11 27Sep11 27Nov11West European gasoil contracts peaked at around USD -1025/barrel. Cracks have recently softened to levels aroundUSD 15/barrel. High-frequency inventory data from the USand Europe show a stabilisation in middle distillate stocks -20the past few weeks (see Charts 13, 47 and 48), whichcorresponds with the weaker price trend. In Europe, low -30water levels in the Rhine in November limited distribution Gasoil 0.1% FOB Brg Eurobob Gasoline FO 3.5% FOB Brgresulting in a slight build-up of stocks at independent Source: Bloombergstorages around Amsterdam-Rotterdam- Oil Market Monthly 5 of 16
  6. 6. 22/12/2011Antwerp (ARA). In Asia, middle distillate stocks are Chart 13: European gasoil inventories have stabilised m tonnes ARA Gasoil inventoriesparticularly low in Singapore (Chart 14) on the back of 3.5robust demand, particularly from China which returned as anet diesel importer in October and November, and lower 3.0supply due to large refinery outages earlier this autumn.Barring much colder-than-normal weather or sharp runs cuts 2.5due to limited crude oil supply, we expect middle distillatecracks to have passed their peak but to remain firm. Going 2.0into 2012, the weakening of cracks will be mostly driven byhigher crude availability/runs coupled with a recovery of 1.5Russian exports, where middle distillate exports shouldincrease after completion of the government-directed stock 1.0builds. We expect distillate stocks to build again going into 0.5H1 2012. The recurring power shortages in China entailupside risk to diesel demand, but a slowing global economy Week 0.0provides a counterbalance. Crude oil prices will 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52nevertheless remain the main driver of the trend in product 2011 2010 2009 2008price levels, as refinery capacity is ample. Source: BloombergFuel oil outlookHeavy fuel oil prices relative to crude oil prices have Chart 14: Singapore middle distillates remain very lowremained firm since our November report, after weakening m barrels Singapore Middle Distillates (Kerosene and Gasoil) inventoriesinitially. The 3.5% Rotterdam front month crack spread to 18Dated Brent remains around negative USD 10/barrel, as fueloil supply has remained muted still. Weak refinery margins 16amid tight crude supply have prompted runs cuts, which 14reduced straight-run fuel oil production. Meanwhile,sophisticated refineries have maximised the use of their 12conversion capacity which additionally reduced fuel oilproduction. High-frequency inventory data in Europe show a 10continued stabilisation in fuel oil stocks from the official 8October OECD inventory statistics released by the IEA inmid-December (Chart 15). Fuel oil demand will be 6supported by power generation needs, especially in Japandue to the nuclear outages, but bunkers demand growth will 4slow in the near term together with the global economy. 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52Higher crude availability/runs over the coming months will 5y range 2011 2010 5 year avgnaturally increase fuel oil supply and weaken fuel oil Source: Bloombergbalances. We expect fuel cracks relative to Brent to softenfurther from current strong levels, but do not foresee anycollapse in fuel oil prices relative to crude oil as in 2008. Chart 15: Fuel oil inventories at ARA continued to stabilise m tonnes ARA Fuel oil inventories 1.20 1.00 0.80 0.60 0.40 0.20 Week 0.00 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 2011 2010 2009 2008 Source: Bloomberg Oil Market Monthly 6 of 16
  7. 7. 22/12/2011Key Market DataTable 2: Crude oil and oil products futures Date: 21/12/2011 Nordea ForecastCrude Oil and Products Futures Unit Exchange Front month M/M chg Dec-12 M/M chg 2011E 2012EBrent Crude Oil USD/bbl ICE 107.71 1.0% 104.08 0.3% 110 109WTI Crude Oil USD/bbl NYMEX 98.67 1.7% 97.67 1.8%ICE Gasoil USD/t ICE 907.50 -2.9% 893.75 -2.6%Heating Oil No.2 USd/gal. NYMEX 290.87 -3.2% 289.38 -2.4%RBOB Gasoline USd/gal. NYMEX 261.99 4.9% 247.57 2.4%Table 3: Oil product swaps Date: 21/12/2011OTC Products Swaps Unit Source 1st Month M/M chg 1st Qtr M/M chg 1st Year M/M chgFuel Oil 3.5% FOB Barges ARA USD/t Bloomberg 613 1.7% 609 2.2% 595 1.8%Fuel Oil 1% FOB Cargoes NWE USD/t Bloomberg 648 3.1% 643 3.2% 628 2.1%0.1% Gasoil CIF Cargoes NWE USD/t Bloomberg 916 -3.9% 912 -3.0% 904 -2.9%Jet Fuel CIF Cargoes NWE USD/t Bloomberg 986 -3.1% 989 -2.3% 1,011 -1.8%Sing 380 Fuel Oil USD/t Bloomberg 642 1.6% 634 2.8% 617 2.1%Table 4: Related Commodities, spot prices Date: 21/12/2011Commodity Unit Index provider/source Quote type Last M/M chg YTD chgGold USD/t. oz. Bloomberg Spot 1,615.23 -3.7% 13.7%US Natural Gas, Henry Hub USD/MMBtu Bloomberg Spot 3.03 2.7% -28.4%UK Natural Gas, National Balancing Point GBp/therm Bloomberg Day Ahead 54.60 -9.6% -11.9%Thermal coal, CIF ARA (API2) USD/t McCloskey Spot weekly 110.09 -4.4% -16.5%Steel, SBB World Price Tracker USD/t Steel Business Briefing Spot weekly 242.62 -2.4% 1.7%Iron Ore 62% Fe Fines (CFR Tianjin port) USD/t Steel Business Briefing Spot 134.80 -8.5% -20.8%Baltic Dry Index index Baltic Exchange Spot 1,856 -1.0% 4.7%Baltic Dirty Tanker Index index Baltic Exchange Spot 902 14.8% -13.5%Table 5: Financial Markets Date: 21/12/2011Index Currency Source Last M/M chg YTD chgS&P 500 USD Bloomberg 1,243.72 4.3% -1.1%Euro Stoxx 50 EUR Bloomberg 2,244.35 3.9% -19.6%Shanghai SE Composite CNY Bloomberg 2,191.15 -9.3% -22.0%Dollar Index Index Bloomberg 80.02 2.2% 1.3% Oil Market Monthly 7 of 16
  8. 8. 22/12/2011Oil futures, price historyChart 16: ICE Brent 1st month (USD/bbl) Chart 17: NYMEX WTI 1st month (USD/bbl) 140 120 120 100 100 80 80 60 60 40 40 20 20 0 0 21Dec09 21Jun10 21Dec10 21Jun11 21Dec09 21Jun10 21Dec10 21Jun11Source: Bloomberg Source: BloombergChart 18: ICE Gasoil (USD/t) Chart 19: NYMEX Heating Oil No. 2 (USd/gal.) 1,200 350 1,000 300 250 800 200 600 150 400 100 200 50 0 0 21Dec09 21Jun10 21Dec10 21Jun11 21Dec09 21Jun10 21Dec10 21Jun11Source: Bloomberg Source: BloombergChart 20: NYMEX RBOB Gasoline (USd/gal.) 400 350 300 250 200 150 100 50 0 21Dec09 21Jun10 21Dec10 21Jun11Source: Bloomberg Oil Market Monthly 8 of 16
  9. 9. 22/12/2011Oil products, spot price historyChart 21: Fuel Oil 3.5% FOB Barges ARA (USD/t) Chart 22: Fuel Oil 1% FOB Cargoes NWE (USD/t) 700 800 600 700 600 500 500 400 400 300 300 200 200 100 100 0 0 21Dec09 21Jun10 21Dec10 21Jun11 21Dec11 21Dec09 21Jun10 21Dec10 21Jun11Source: Bloomberg Source: BloombergChart 23: 0.1% Gasoil CIF Cargoes NWE (USD/t) Chart 24: Ultra Low Sulfur Diesel 10ppm CIF Cargoes NWE (USD/t) 1,200 1,200 1,000 1,000 800 800 600 600 400 400 200 200 0 0 21Dec09 21Jun10 21Dec10 21Jun11 21Dec11 21Dec09 21Jun10 21Dec10 21Jun11 21Dec11Source: Bloomberg Source: BloombergChart 25: Jet Fuel CIF Cargoes NWE (USD/t) Chart 26: Sing 380 Fuel Oil (USD/t) 1,200 800 700 1,000 600 800 500 600 400 300 400 200 200 100 0 0 21Dec09 21Jun10 21Dec10 21Jun11 21Dec11 21Dec09 21Jun10 21Dec10 21Jun11 21Dec11Source: Bloomberg Source: Bloomberg Oil Market Monthly 9 of 16
  10. 10. 22/12/2011Crack spreads, price historyChart 27: Fuel Oil 3.5% Crack (USD/bbl) Chart 28: Fuel Oil 1% Crack (USD/bbl) 0 0 17Dec10 17Mar11 17Jun11 17Sep11 17Dec11 17Dec10 17Mar11 17Jun11 17Sep11 17Dec11 -5 -5 -10 -10 -15 -15 -20 -20 -25 -30 -25Source: Bloomberg Source: BloombergChart 29: 0.1% Gasoil Crack (USD/bbl) Chart 30: Ultra Low Sulfur Diesel 10ppm Crack (USD/bbl) 30 30 25 25 20 20 15 15 10 10 5 5 0 0 17Dec10 17Mar11 17Jun11 17Sep11 17Dec11 17Dec10 17Mar11 17Jun11 17Sep11 17Dec11Source: Bloomberg Source: BloombergChart 31: Jet Fuel Crack (USD/bbl) Chart 32: Sing 380 Fuel Oil Crack (USD/bbl) 25 4 2 20 0 17Dec10 17Mar11 17Jun11 17Sep11 17Dec11 -2 15 -4 10 -6 -8 5 -10 -12 0 17Dec10 17Mar11 17Jun11 17Sep11 17Dec11 -14Source: Bloomberg Source: Bloomberg Oil Market Monthly 10 of 16
  11. 11. 22/12/2011Forward curves, futuresChart 33: ICE Brent (USD/bbl) Chart 34: NYMEX WTI (USD/bbl) 130 110 105 120 100 110 95 90 100 85 90 80 80 75 70 70 65 60 60 1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 1 6 11 16 21 26 31 36 41 46 51 56 6m range 21/12/2011 1m ago 2m ago 6m range 21/12/2011 1m ago 2m agoSource: Bloomberg Source: BloombergChart 35: ICE Gasoil (USD/t) Chart 36: NYMEX Heating Oil No. 2 (USd/gal.) 1,050 340 1,000 320 950 300 900 850 280 800 260 750 240 700 220 650 600 200 1 4 7 10 13 16 19 22 25 28 31 34 1 3 5 7 9 11 13 15 6m range 21/12/2011 1m ago 2m ago 6m range 21/12/2011 1m ago 2m agoSource: Bloomberg Source: BloombergChart 37: NYMEX RBOB Gasoline (USd/gal.)330310290270250230210190170150 1 4 7 10 13 16 19 22 25 28 31 34 6m range 21/12/2011 1m ago 2m agoSource: Bloomberg Oil Market Monthly 11 of 16
  12. 12. 22/12/2011Forward curves, oil product swapsChart 38: Fuel Oil 3.5% FOB Barges ARA (USD/t) Chart 39: Fuel Oil 1% FOB Cargoes NWE (USD/t)640 670630 650620610 630600 610590580 590570 570560550 550 1 2 3 4 5 6 7 1 2 3 4 5 6 7 21/12/2011 1m ago 2m ago 21/12/2011 1m ago 2m agoSource: Bloomberg CFVL Source: Bloomberg CFVLChart 40: 0.1% Gasoil CIF Cargoes NWE (USD/t) Chart 41: Ultra Low Sulfur Diesel 10ppm CIF Cargoes NWE (USD/t)1,000 1,000 980 980 960 960 940 940 920 920 900 900 880 880 860 860 840 840 820 820 800 800 1 2 3 4 5 6 7 1 2 3 4 5 6 7 21/12/2011 1m ago 2m ago 21/12/2011 1m ago 2m agoSource: Bloomberg CFVL Source: Bloomberg CFVLChart 42: Jet Fuel CIF Cargoes NWE (USD/t) Chart 43: Sing 380 Fuel Oil (USD/t)1,100 680 6601,050 6401,000 620 600 950 580 900 560 540 850 520 800 500 1 2 3 4 5 6 7 1 2 3 4 5 6 7 21/12/2011 1m ago 2m ago 21/12/2011 1m ago 2m agoSource: Bloomberg CFVL Source: Bloomberg CFVL Oil Market Monthly 12 of 16
  13. 13. 22/12/2011DOE Weekly Inventories (US)Chart 44: Total Products inventories (mb) Chart 45: Total Crude Oil inventories (mb) 1,200 390 1,150 370 350 1,100 330 1,050 310 1,000 290 950 270 900 250 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 5y range 2011 2010 5 year avg 5y range 2011 2010 5 year avgSource: Bloomberg Source: BloombergChart 46: Total Motor Gasoline inventories (mb) Chart 47: Total ULSD < 15ppm inventories (mb) 250 140 240 120 230 100 220 80 210 60 200 40 190 180 20 170 0 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 5y range 2011 2010 5 year avg 5y range 2011 2010 5 year avgSource: Bloomberg Source: BloombergChart 48: Total Heating Oil (HSD > 500 ppm) inventories (mb) Chart 49: Total Residual Fuel Oil (mb) 70 48 65 46 60 44 55 42 50 40 45 38 40 35 36 30 34 25 32 20 30 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 5y range 2011 2010 5 year avg 5y range 2011 2010 5 year avgSource: Bloomberg Source: Bloomberg Oil Market Monthly 13 of 16
  14. 14. 22/12/2011DOE Weekly Demand (US)Chart 50: Total Refinery Input to Distillation (mb/d) Chart 51: Total Products Demand (mb/d) 17 23 16 22 15 21 14 20 13 19 12 18 11 17 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 5y range 2011 2010 5 year avg 5y range 2011 2010 5 year avgSource: Bloomberg Source: BloombergChart 52: Motor Gasoline Demand (mb/d) Chart 53: Distillates Demand (mb/d) 10,000 5,000 9,800 9,600 4,500 9,400 9,200 4,000 9,000 8,800 3,500 8,600 8,400 3,000 8,200 8,000 2,500 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 5y range 2011 2010 5 year avg 5y range 2011 2010 5 year avgSource: Bloomberg Source: BloombergChart 54: Residual Fuel Oil Demand (mb/d) Chart 55: Jet Fuel Demand (mb/d) 1,600 2,000 1,400 1,900 1,800 1,200 1,700 1,000 1,600 800 1,500 600 1,400 1,300 400 1,200 200 1,100 0 1,000 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 5y range 2011 2010 5 year avg 5y range 2011 2010 5 year avgSource: Bloomberg Source: Bloomberg Oil Market Monthly 14 of 16
  15. 15. 22/12/2011DOE Weekly Production & Imports (US)Chart 56: Total Domestic Crude Oil Production (mb/d) Chart 57: Total Crude Oil Refinery Runs (mb/d) 6.5 17 6.0 16 5.5 15 5.0 14 4.5 13 4.0 12 3.5 11 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 5y range 2011 2010 5 year avg 5y range 2011 2010 5 year avgSource: Bloomberg Source: BloombergChart 58: Motor Gasoline Production (kb/d) Chart 59: Distillates Production (kb/d) 10,000 5,500 9,500 5,000 9,000 4,500 8,500 4,000 8,000 3,500 7,500 3,000 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 Series4 2011 2010 5 year avg 5y range 2011 2010 5 year avgSource: Bloomberg Source: BloombergChart 60: Net Crude Oil Imports, 4 week moving averages (mb/d) Chart 61: Net Product Imports, 4 week moving averages (mb/d) 11.0 3.5 10.5 3.0 10.0 2.5 9.5 2.0 9.0 1.5 1.0 8.5 0.5 8.0 0.0 7.5 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 -0.5 7.0 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 -1.0 5y range 2011 2010 5 year avg 5y range 2011 2010 5 year avgSource: Bloomberg Source: Bloomberg Oil Market Monthly 15 of 16
  16. 16. 22/12/2011CFTC Commitments of Traders ReportChart 62: NYMEX WTI (USD/bbl) Chart 63: NYMEX Heating Oil No. 2 (USd/gal.) 120 12% 350 14% 110 10% 12% 300 100 10% 8% 250 8% 90 6% 80 200 6% 4% 70 4% 150 60 2% 2% 50 0% 100 0% 14Dec10 14Mar11 14Jun11 14Sep11 14Dec10 14Mar11 14Jun11 14Sep11 WTI 1M Man. Money Net Pos. of OI (rhs) NYM Heating Oil 1M Man. Money Net Pos. of OI (rhs)Source: Bloomberg Source: BloombergChart 64: NYMEX RBOB Gasoline (USd/gal.) Managed Money is a category of traders defined by the Commodity Futures 350 25% Trading Commission (CFTC) as either a registered commodity trading advisor (CTA), a registered commodity pool operator (CPO) or an unregistered fund (hedge fund). These traders are engaged in managing and conducting 300 20% organized futures trading on behalf of clients. 250 15% Net positions measures the accumulated positioning for a given point in time for all traders in a CFTC category. Managed Money net positions gauges the sentiment for future price direction among the "speculative" or "financial" 200 10% traders in the futures markets. Large net positions of Managed Money can be interpreted as a contrarian 150 5% risk signal: A turn in the sentiment could create a large amount of position squaring from these traders. Net long positions would require selling and thus downward pressure on prices. Net short positions would require buying 100 0% and thus upward pressure on prices. 14Dec10 14Mar11 14Jun11 14Sep11 RBOB Gasoline 1M Man. Money Net Pos. of OI (rhs)Source: Bloomberg Nordea Markets is the name of the Markets departments of Nordea Bank Norge ASA, Nordea Bank AB (publ), Nordea Bank Finland Plc and Nordea Bank Danmark A/S. The information provided herein is intended for background information only and for the sole use of the intended recipient. The views and other information provided herein are the current views of Nordea Markets as of the date of this document and are subject to change without notice. This notice is not an exhaustive description of the described product or the risks related to it, and it should not be relied on as such, nor is it a substitute for the judgement of the recipient. The information provided herein is not intended to constitute and does not constitute investment advice nor is the information intended as an offer or solicitation for the purchase or sale of any financial instrument. The information contained herein has no regard to the specific investment objectives, the financial situation or particular needs of any particular recipient. Relevant and specific professional advice should always be obtained before making any investment or credit decision. It is important to note that past performance is not indicative of future results. Nordea Markets is not and does not purport to be an adviser as to legal, taxation, accounting or regulatory matters in any jurisdiction. This document may not be reproduced, distributed or published for any purpose without the prior written consent from Nordea Markets. Oil Market Monthly 16 of 16

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