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Trends

Rotterdam (ARA) fuel oil - Trading USD 2 higher

Singapore fuel oil - Trading USD 1 lower

US Gulf fuel oil - Expected to open USD 3 higher

OPEC has a record month, again (Brent: $111.2)

Pump(ing) up the jam oil

The Organization of Petroleum Exporting Countries (OPEC) had yet another record output month. Pumping a record 30.95 million barrels per bay (mbpd) in January, beats the December output of 30.7 mbpd, and is almost a clean million barrels per day above the 30 mbpd OPEC agreed upon in mid-December.

The increase in production is mainly due to a return of Libya production, which is now at approximately 1 mbpd. The extra produced crude is on eastbound ships, which the record low inventories in Europe confirm. We therefore advise clients to prepare for potential higher oil prices, as any increase in demand would have a serious bullish impact on oil prices.

Before the end of this month the Energy Information Agency (EIA) will start publishing reports on the impact of sanctioning Iran. The tougher financial sanctions imposed by President Obama one month ago will be studied in particular. We await the report with anticipation, and will keep you posted here in the Market Briefings as soon as possible.

Recommendation

We recommend consumers who have not hedged yet, to use market dips to establish hedges. The current geopolitical environment in combination with low inventories makes a situation with massive oversupply rather unlikely. Any drop in oil on the back of economic worries can prove to be short-lived as FED is prepared to start the printing press once again. 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.