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Fuel oil trend

Rotterdam: $ 4 higher.
Singapore: $ 4 higher.
US Gulf: $ 1 higher.

Oil swapped for nuclear reactor? (Brent: $109.1)

Remarks by the Iranian ambassador, Mehdi Sanaei, in Moscow were published yesterday. He suggested Russia could receive "a few hundred thousand [oil] barrels per day" in exchange for building a second nuclear reactor in Bushehr. It was also suggested that Iran would swap oil for mini-refineries or railroad tracks. This would be more or less in direct conflict with western sanctions imposed on Iran to curb the country's nuclear program. If the second nuclear reactor is installed it would be a slap in the face for the U.S. as its fifth fleet is stationed pretty much just on the other side of the Persian Gulf. Negotiations between Russia and Iran are supposedly underway and ambassador Sanaei said a deal could be signed within the next 6 months. A signed deal would mean at least two things for the oil market. Firstly an additional 0.5 mbpd in the market would logically bring down prices (assuming unchanged demand). Secondly the geopolitical risk premium would likely start to increase depending on how the U.S. and EU would react to such a deal. Ultimately it will come down to political craftsmanship, something that usually rhymes with increased volatility.

No major (scheduled) event today

No (important) macroeconomic figures are scheduled for today, but likely U.S. trades will cause a small spike in volatility this afternoon as positions are adjusted after yesterday's holiday.

Recommendation

We particularly advise consumers to take note that the low inventories for distillates and lighter products could lead to fundamentally firmer prices.