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                 Libya leaves OPEC spare capacity critically low FRIDAY 25 FEBRUARY 2011 TECHNICAL ANALYSIS  EUR/USD: bullish Brent crude: bullish COMMODITY RESEARCH  Bjarne Schieldrop Chief Analyst +47 92 48 92 30  Filip Petersson Commodity Strategist +46 8 506 230 47    Yesterday, Brent crude closed 0.10% higher at $111.36/b after having traded in a $109.60-119.79/b intraday range. Crude oil rallied to the intraday high in the morning as the main part of the Libyan oil production (about 1.0 mb/d out of 1.6 mb/d) appeared to have ground to a halt and a potentially extended state of civil war appeared more likely than a quick resolution to the conflict. When printing the intraday high, close to $120/b, Brent crude had rallied 16% over the week. However, as Saudi Arabia and OPEC started enquires concerning which qualities European refineries wished to receive in replacement for Libyan oil and promised to deliver without a formal OPEC meeting decision, prices started to fall back substantially. A rumour in the market that Gaddafi had been assassinated also triggered a wave of profit taking. However, there are serious doubts concerning what will happen if Gaddafi falls. He has been a mastermind in micromanaging the country and there is most likely only a weak public administration to take over when he is gone. Elsewhere yesterday we noted better than expected US jobless c laims, slightly bullish DOE inventory statistics but bearish housing statistics. We also note that the Brent futures curve has been pushed into backwardation over the last few days due to the MENA crisis.  Yesterday evening, the DOE reported that US crude oil inventories rose 822 kb last week (vs. exp. +1100 kb), distillate inventories fell 1333 kb (vs. exp. -1200 kb) and gasoline inventories fell 2798 kb (vs. exp. +850 kb). Changes were thus in the same direction as reported by the API the day before (crude +163 kb, distillates -534 kb, gasoline -1621 kb). According to both reports, Cushing inventories and refinery activity fell but they were inconsistent with regards to imports with DOE reporting a fall.  Today, statistical releases include German CPIs (09.00-12.00), US Q4 GDP (14.30), US personal consumption (14.30) and US University of Michigan consumer confidence (15.55).  This morning, Brent crude is trading significantly higher (at $113.25/b at the time of writing). Asian equities are rebounding after several days of losses, mainly trading in the black. US index futures are also well into the black while the dollar index is marginally weaker..  The intraday high printed yesterday ($120/b) was probably about as high as Libya alone can push oil prices. In order for Brent crude to move significantly above that level extensive unrest needs to be seen in Algeria, Saudi Arabia or Iran. As OPEC ramp up production to meet the Libyan shortfall reserve capacity risks falling to a level that makes it difficult to respond to additional production disturbances in the short term. While hard line regimes quell protests immediately in Algeria and Iran, the Saudi Arabian King has been announcing generous spending programmes to improve already good living conditions in the country compared to other nations in the region. Bahrain and Yemen are marginal disturbances in the big picture but are of some interest due to their vicinity to Saudi Arabia. Thus we see no major spread risk at the moment but expect that oil prices could easily move several dollars up or down intraday depending on the development in Libya and signs of unrest elsewhere. However, we consider the upside risk dominating and thus hold on to our neutral to bullish view.  Filip Petersson, Commodity Strategist  To subscribe or unsubscribe, please e-mail [email protected]   

SEB's crude oil comment: Libya leaves OPEC spare capacity critically low

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Crude Oil Comment

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 The information in this document has been compiled by SEB Merchant Banking, a division within Skandinaviska EnskildaBanken AB (publ) (“SEB”). Opinions contained in this report represent the bank’s present opinion only and are subject to change without notice. All

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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