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Trends

Rotterdam: $ 1 higher
Singapore: $ 2 higher
US Gulf: $ 2 lower

Air strike in the Middle East, risk premium up (Brent: $114.9)

Some confusion as to what happened in Syria. Apparently Israeli fighter jets conducted an air strike near the Syrian border. Reports that a missile convoy was targeted (and hit) are being denied by Syria that claims the fighters hit a military research facility near Damascus. No matter which story turns out to be correct, the geopolitical risk premium for oil prices has increased. Fear that the unrest will spread to surrounding countries will put a floor under oil prices.

From 6 February a fresh set of U.S. sanctions are set to hit Iranian oil exports. The sanctions implemented in the summer 2012 saw Iranian exports drop from 2.2 mbpd to a record low 0.9 mbpd. However, in recent months Iran has successfully worked its way around the sanctions and is now shipping approximately 1.4 mbpd - mainly eastbound. The "new and enhanced set of sanctions" are far from likely to have Teran reconsider its nuclear efforts. Some short term jitters expected, but the overall "new-sanction"-impact on prices is likely in the shallow end of the oil-pool.

Recommendation

The general tendency in oil prices is bullish at the moment. Mainly because investors’ risk appetite is back after the postponement of the fiscal cliff in the U.S. - combined with a reduction in Saudi Arabian oil production in Dec12 and fading fear of an EU collapse. The timing seems optimal for producers to secure their budgets - and consumers to keep an eye on oil price dips.