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Fuel oil trend

Rotterdam: $ 10 higher.
Singapore: $ 12 higher.
US Gulf: $ 11 higher.

Crimea and oil prices (Brent: $111.3)

The Russian "invasion" of the Ukrainian autonomous republic Crimea has really stirred up the water on the geopolitical scene. As Russia is a major oil exporter (6mbpd to Europe) as well as gas supplier (4 pipelines through Ukraine into Europe which is Russia's biggest market), oil prices reacted rather strongly to the "invasion" though it has not come to any major clashes between Ukrainian and Russian forces. 60 years ago Crimea was a part of Russia, and even today the majority of the population is Russian. In the short run, there will be massive turmoil on this topic, and likely oil prices will increase slightly more (assumed things do not escalate) before stabilising. In the long run however; Russia is dependent on exports to Europe and would likely prefer to keep its G8 membership. Things will therefore probably play out as the following: Western countries to condemn Russian action (check), Russian PM Putin is not likely to withdraw troops easily (think Chechnya), therefore a referendum, where the people of Crimea can vote their way back to Russia (or not) seems the most likely outcome. For oil prices the above-mentioned outcome will likely spell price action of: slight increase, stabilisation, before slowly retracing (assuming there will not be any other catalysts) to 110-ish. (You don't just remove a geopolitical risk premium overnight).

Later today, some events that usually would rock the market boat (slightly) are scheduled. ECB chairman Draghi speaks at 15.00 CET, U.S. business temperature (ISM) is due at 16.00 CET. Due to the events in Crimea, we do not think the market will react a whole lot to the two events today.