NEWS / Foreign Exchange

Crude Resilent After Large Than Expected Drop In Distillates

- The EIA releases its weekly natural gas inventory data today at 10:30 a.m. According to a widely followed wire survey, natural gas inventories are expected to have risen 55bcf last week. Yesterday the EIA reported that crude oil inventories rose more than expected by 4.31M barrels, gasoline inventories declined less than expected by 77K barrels and distillate inventories declined more than expected by 5.03M barrels.

- Front month crude oil futures are currently trading slightly higher in the session. Crude has fallen from its best levels this week after the Iranian president announced that he would send the 15 British naval personal home. The personnel boarded a UK bound plane in Tehran ahead of the European open. Despite falling from this week??™s highs, crude oil remains resilient underpinned by the greater than expected fall in distillate inventories yesterday. Recall that distillates fell by 5.03M barrels; expectations were for a decline of 800K barrels.

- According to the New York Times Royal Dutch Shell expects to resume full crude output in the Niger Delta region within the next 5 to 6 months. Shell had shut down more than half of its operations in the region due to militant attacks, but will be able to recommence operations after reaching an agreement with local communities. The operations generate approximately 500K bpd.

- Overnight the World Bank forecasted average oil prices of $56.50/barrel in 2007, noting that the forecast appears ???a bit low???. The World Bank also said that the oil price outlook remains volatile.

- The OPEC president said overnight that high oil prices are a result of current geopolitical situations, and do not reflect fundamentals. The president said that OPEC is currently pleased with the global situation, noting that the global economy is in firm, robust shape. Finally, the OPEC president said that there is no need for OPEC to meet ahead of the meeting that is scheduled in September.

- The IEA Chief made a single comment overnight; The Chief said that investment in oil producing countries is currently not enough to meet demand in the long term.