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Trends

Rotterdam (ARA) fuel oil - Trading USD 8 lower

Singapore fuel oil - Trading USD 4 lower

US Gulf fuel oil - Expected to USD 7 higher

The US mean business (Brent: $111.9)

Iran update: sanctions enforced

The United States has decided to sanction at least three companies (from China, Singapore, UEA) for selling refined products to Iran. They will no longer be able to obtain a US export license, nor can they borrow more than $10 million from any US bank. Although it might have little effect on these three companies the Obama administration sends a clear signal to the world that the gloves are off. According to the New York Times, there has been direct contact between the Joint Chiefs of Staff, Secretary of State Hillary Clinton and Spiritual lead of Iran Ayatollah Ali Khamenei. The contact was to make it clear that the US would consider a closing of Hormuz as an act of war and would respond accordingly.

Oil strikes

On Sunday Nigeria will start to halt some of its 2.5 million barrels per day production. Workers are still unhappy with the removal of fuel subsidies, but President Goodluck Jonathan remains confident that in the end Nigeria will benefit from the reallocation of the $7.5bn subsidy to public infrastructure. Furthermore, workers in Argentina have halted the 100,000 bpd production due to a dispute over salaries.

Recommendation

We recommend consumers who have not hedged yet, to use market dips to establish hedges. Any disruption in Hormuz and/or Nigeria would have a severe impact on oil prices, and we strongly advise clients to have this top of mind. As OPEC will likely support prices around and above 100, we therefore advise consumers to prepare for three digit oil prices on average for 2012.