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Trends

Rotterdam (ARA) fuel oil - Trading USD 1 higher

Singapore fuel oil - Trading USD 4 lower

US Gulf fuel oil - Expected to open USD 1 higher

Update: Ban on Iranian crude (Brent: $110.3)

More details are out on the EU’s ban on Iranian oil. In addition to banning all imports into the EU, the agreement bans all European based citizens and/or companies to trade Iranian crude. This will mean that not only the 600,000 barrels per day imported to the EU will be affected. A back of the envelope calculation amounts to several hundred thousand barrels per day above the 600 kbpd.

Unless Iran can ship its oil elsewhere, the EU agreement, in joint venture with the tighter US regulations, will really corner leaders of the Middle Eastern Country. Furthermore, food prices will skyrocket as the Iranian currency (Rhial) has plummeted, so in addition to the external pressure, leaders in Iran might have to deal with rising domestic discontent in a not so distant future.

Yesterday's API numbers had a rather large build on crude, while distillates continue to show lower and lower numbers. Later today (16.30 cet) the EIA inventory numbers will be published.

Release: API oil data (Consensus)

Crude: 7,300,000 barrels (800,000)
Distillates: -2,500,000 barrels (0)
Gasoline: -600,000 barrels (1,900,000)

Recommendation

We recommend consumers who have not hedged yet, to use market dips to establish hedges. Any disruption in Hormuz would have severe impact on oil prices, and we continue to advise clients in having 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.