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Fuel oil trend

Rotterdam: trading unchanged Singapore: $ 7 lower US Gulf: $ 1 higher.

Refinery strike, and kindergarden politics (Brent: $109.3)

The 210,000 bpd Scottish Grangemouth refinery will be shutting down shortly as a labour strike is about to kick in. Potentially, it could affect the flow in the Forties Pipeline System (Forties is one of the underlying oil fields used to price Brent). We estimate a minor (bullish) impact on price when considering this factor alone. It is however, highly likely to be overruled by the fact that the much dreaded "U.S. debt ceiling deadline" is due. Tomorrow. Once again we would like to take the opportunity to repeat our forecast: No, the world will not come to an end. Yes, a solution will be found (either the politicians will grow up, or the adults in Treasury/FED will circumvent the power of the political kindergarden.

Talks between the West and Iran go on in Geneva today – though there is a positive tone between the parties there is still a long way to go before sanctions will be lifted.

We do not expect that the weekly oil inventory numbers – due 17.00 CET tomorrow – will be published since the numbers are published by the EIA and thus affected by the U.S. debt ceiling negotiations.

Recommendation

The political kindergarden stand-off in the U.S. will soon start to hurt GDP growth. Job creation should also experience a smaller setback. As a result hereof, we think the tapering of QE by the FED is not just around the corner. Prolonged QE would act as support of oil prices.