Image credit: Freight Investor Services (FIS)

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Commentary

Morning. The market is almost resembling the whip saw of an actual hurricane at the minute as we ease off from yesterday's push towards $80. Oil prices are off -0.8% at the open as U.S. storm threat eases, but Iran sanctions loom -

- Tropical storm Gordon's impact weaker than expected, turns east

- Typhoon hits Japan's coast, but refinery damage is limited

- Oil markets tense ahead of U.S. oil sanctions against Iran

- Emerging market weakness seen as risk to oil demand

- Saudi Arabia wants crude price between $70-80 per barrel

Prices had jumped the previous day as dozens of U.S. oil and gas platforms in the Gulf of Mexico were shut in anticipation of damage from tropical storm Gordon. However, the storm had shifted eastward by Wednesday and was weakening, reducing its threat to producers on the western side of the Gulf. Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda, said many crude futures traders were "caught long and wrong over the past 24 hours due to the tropical storm buying frenzy", adding that "prices pulled back considerably as the magnitude of the storm suggests production losses will be limited". A typhoon also hit Japan's east coast overnight, with some damage to oil refineries in the Osaka region, although operator JXTG 5020.T said its operations were not significantly affected. Innes said the price outlook for crude was still bullish, in large part because of U.S. sanctions targeting Iran's oil sector from November. "With the anticipation of up to 1.5 million barrels per day affected by the U.S. sanctions on Iran, one would expect prices to move higher in the weeks ahead."

Fuel Oil Market (Sep 04)

The fuel oil market steadied today after losses in the previous session due to expectations of rising arbitrage supplies into Singapore in September. Crack remained pretty flat at -11.80. The prompt month 380 cSt time spread edged up to $4.50 a tonne on Tuesday, pulling away from a more than two month low of $4.25 a tonne hit in the previous session. Meanwhile, the weaker fuel oil market sentiment and rising crude prices also weighed on cracks of the residual fuel. The September 380 cSt fuel oil barge crack discount to Brent crude slipped 9 cents a barrel from the previous session to minus $11.29 a barrel on Tuesday. The prompt month discount was last wider on May 28. Oil prices rose sharply on Tuesday after the evacuation of two Gulf of Mexico oil platforms in preparation for a hurricane.

Economic data/events (Times are London.)

* 9:30pm: API issues weekly U.S. oil inventory report (A day later than usual because of Labor Day holiday)

* U.S. Census Bureau releases July crude exports data

* World Heavy Oil Congress in Muscat, final day

* Abu Dhabi International Downstream Summit, final day

* Genscape weekly ARA crude stockpiles report

* Africa Oil and Power conference in Cape Town, Day 1 of three.

OPEC Secretary-General Mohammad Barkindo, oil ministers from Nigeria, Equatorial Guinea and Angola are scheduled to attend

* Bloomberg-compiled refinery snapshot for U.S., providing offline capacity projections for crude units and FCCs

** See OIL WEEKLY AGENDA for this week's events

Singapore 380 cSt

Oct18 - 433.50 / 435.50

Nov18 - 429.75 / 431.75

Dec18 - 426.50 / 428.50

Jan19 - 423.00 / 425.00

Feb19 - 419.50 / 421.50

Mar19 - 416.50 / 418.50

Q4-18 - 430.00 / 432.00

Q1-19 - 419.50 / 421.50

Q2-19 - 409.50 / 412.00

Q3-19 - 394.25 / 396.75

CAL19 - 397.50 / 400.50

CAL20 - 332.00 / 338.00

Singapore 180 cSt

Oct18 - 440.25 / 442.25

Nov18 - 437.50 / 439.50

Dec18 - 435.75 / 437.75

Jan19 - 433.25 / 435.25

Feb19 - 430.00 / 432.00

Mar19 - 427.25 / 429.25

Q4-18 - 438.00 / 440.00

Q1-19 - 429.50 / 431.50

Q2-19 - 421.25 / 423.75

Q3-19 - 409.25 / 411.75

CAL19 - 412.00 / 415.00

CAL20 - 355.00 / 361.00

Rotterdam 3.5%

Oct18 - 413.00 / 415.00

Nov18 - 409.00 / 411.00

Dec18 - 405.50 / 407.50

Jan19 - 403.00 / 405.00

Feb19 - 400.50 / 402.50

Mar19 - 397.75 / 399.75

Q4-18 - 409.25 / 411.25

Q1-19 - 401.00 / 403.00

Q2-19 - 391.50 / 394.00

Q3-19 - 372.75 / 375.25

CAL19 - 376.00 / 379.00

CAL20 - 311.00 / 317.00