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Fuel oil trend

Rotterdam: $ 6 lower.
Singapore: $ 5 lower.
US Gulf: $ 6 lower.

Been there, done that, got the t-shirt (Brent: $105.8)

If I had a dollar for every time Libyan rebels and the Tripoli government made a deal to restart production, and one more when the deal busted, I’d be…well not wealthy.. but 10 bucks is 10 bucks. In what was (yet another) turn of events the two parties now have "agreed" to slowly restart production. Libyan pre-war production totaled 1.6 mbpd and is currently producing less than 200 kbpd. We estimate production capacity to be somewhere around 1.3 mbpd, but as rebels have controlled many of the oil terminals it’s difficult to assess whether crucial maintenance have been conducted. As hinted in the opening line a “deal” does not mean that oil will start flowing. Last week alone the parties turned 180 degrees – 3 times(!). We therefore remain skeptical that oil will start flowing until the security situation has been resolved (and that seems difficult for the cash strapped Tripoli government to guarantee without money to pay the army).

Ukraine’s gas bill goes up, again

Ukraine has earlier enjoyed a dramatic discount on its Russian gas consumption. Alas, no more. First the discount was removed ($100-ish per 1,000 cubic feet), and now Ukraine is stuck with a gas price that has nearly doubled (from $285 to almost $500). With an import of 28 billion cubic feet from Russia that is a hefty price hike for a country finding itself low on cash (and with a massive repayment of debt this year as well). Even if (i) a large portion of the gas could be imported from other countries and (ii) emergency funding could roll in (from EU/US/IMF/etc.), Ukraine would still have to import a lot of gas from Russia (not to mention that they still owe Russia for previous consumption), which just means a potential implosion would just be delayed. Oil markets will be affected by the Crimean issue for some time, but as long as things do not escalate between western countries and Russia, the impact should be subdued.