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Fuel oil trend

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

Slightly more Iranian oil in the markets (Brent: $106.6)

While the leaders of western countries scratch their heads on what to do with Crimea now being part of Russia; another issue has presented itself that concerns oil prices more directly. In November, the Permanent five members of the U.N. Security Council and Germany (P5+1) agreed on a 6 months' 'sanction-pause' with Iran regarding the latter's nuclear program. Part of the deal was that Iran could not export more than 1mbpd in during the 6 months (approx. 1.2mbpd below pre-sanction exports). With oil exports to Asia countries alone have been just shy of 1mbpd – when combined with exports to other countries have been consistently above 1mbpd since November. For now the Obama administration, the key player regarding the sanctions, believe that the coming months will see a drop in Iranian exports, bringing the average exports of the pause period to 1mbpd. In our, and what seems to be the market view as well, that does currently not seem likely. Expecting 1.1-1.2mbpd of Iranian export seems more appropriate. Although higher than agreed, it will not impact oil prices a whole lot, unless the U.S decides to bring the hammer down (which seems pretty unlikely).

Later today (15.30 CET) the U.S. oil inventories will be published. Further to be aware of today is at 19.00 CET where the Federal Reserve will publish its latest statement. Market participants will closely watch for any hints of faster/slower reduction of the QE3 program. Our basis scenario for price action around the publication of the statement is a non-event.