Oil: Close to close: Down at $ 63.72/bbl for Brent ICE MAY15 (This morning at $ 64.12/bbl)

o    Oil prices posted a significant drop yesterday (close to $2/b) in the wake of a stronger USD and despite expectations of a new decline in US crude inventories. More fundamentally, two opposite forces are at play: on the one hand, better US data suggest at last demand may start picking up. On the other hand, the OPEC meeting next week should back Saudi Arabia’s strategy to maintain abundant output in order to preserve their market shares at the expense of non-OPEC producers, hence the rather narrow trading range for oil prices for some weeks.

o    Main events: The well-known but not-ever-working link between USD and oil prices probably explained most of the last two-day fall in oil prices. Brent 1st-nearby prices went down to touch $63.29/b yesterday, before rebounding somewhat, as the USD abandoned some of its gains. Otherwise, no change on fundamentals. There is a priori no surprise to fear from the next OPEC meeting. The rebound in oil prices from its lows coupled with the slight decline in US output seems validating the Saudi Arabia’s strategy and current OPEC output targets should be confirmed. OPEC output tops the 30Mb/d limit anyway and this is unlikely to cease anytime soon, as Iraq is planning to boost its exports to 3.75Mb/d in June or 800k b/d more than current levels. Iranian exports may also increase significantly in the wake of the expected final deal on its nuclear program. Therefore, oil supply should remain in excess of global demand, even if the US economy is sending positive signals.

o    Outlook: In the short term however, the outlook should be dominated as usual by the release of the EIA inventory report. As Monday was Memorial Day in the US, this report will only be unveiled tomorrow at 5pm. A new decline in crude and product stocks is expected, which likely support prices somewhat. The WTI-Brent spread has slightly narrowed to around $5.5/b, which confirms this impact. For the Brent 1st-nearby prices, we see a strong support around $63.7 and a strong resistance at $66/b. No big move expected today.


Gas: Close to close: Up at 21.59 EUR /MWh for TTF CAL 16 (This morning at EUR 21.60/MWh)

o    European spot prices gained some limited value on Tuesday as supply tightened a bit with an unplanned outage in Norway, a full shutdown of the Zeepipe terminal and a slight drop in Russian flows through the OPAL pipeline. Gas demand was still relatively high for this time of year as temperatures remained below seasonal norms across Europe. However, higher Dutch production dampened overall bullishness on continental spot prices. NBP prompt prices posted the biggest gains as UK gas demand was 25% above seasonal norms due to strong exports to Belgium to compensate for the halt in Norwegian exports through the Zeepipe pipeline.

o    NBP ICE June 2015 prices gained 0.28 p/th at the close (+0.68%), to 41.72 p/th. TTF ICE June 2015 prices were also higher at the close: +10 euro cents (+0.52%), to €20.485/MWh. Further out on the TTF curve, movements remained limited as a sharp drop in oil prices was offset by a further weakening of the euro against the pound. TTF ICE Cal 2016 prices gained 3 euro cents at the close (+0.13%), to €21.589/MWh.

o    Expectations of an increase in temperatures in the continent over the coming days could weigh on European spot prices today. UK gas demand is also expected to decrease today due to a drop in nominations for exports to Belgium as the NBP-ZEE spread tightened yesterday. However, the UK system could remain tight due to a drop in Langeled flows this morning as the impact of the unplanned outage at the Kvitebjorn field in Norway increased.All in all, we favour a stable to slightly bearish outlook for European spot prices today. With no significant move on the prompt, curve contracts could remain range bound as external factors (Brent, EUR/GBP) are not expected to inject strong volatility today.