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Trends

Rotterdam (ARA) fuel oil - Trading USD 1 lower

Singapore fuel oil - Trading USD 1 higher

US Gulf fuel oil - Expected to open USD 1 higher

OPEC puts the pedal to the metal (Brent: $123.2)

On 14 December 2011 OPEC decided on an output level of 30 million barrels per day. The past couple of months, output has been well above 31 mbpd. As inventories (private, not strategic) are not exactly building in Europe and Asia, and US has no use for extra crude*, the logical conclusion would be that oil is simply consumed/taken off the market. We further note that specifically Saudi Arabia is producing close to an all time high. A further increase in production to offset missing Iranian output from 1 July would leave very very little spare capacity in one of the world’s biggest producers.

*The massive flow into Cushing Oklahoma, the benchmark for WTI, has left plenty of crude, but getting set crude to the refineries to get diesel, gasoline etc. is the real US issue.

Despite previous statements Turkey is now scheduled to cut its import of Iranian crude by up to 20%. It seems Iran is losing more and more buyers of its crude. Talks between Iran and Catherine Ashton (on behalf of US, Russia, China, France UK and Germany) are to begin mid-April. Any negative news from the talks, would support oil prices further.

Peace talks between Sudan and South Sudan have come to an abrupt halt, as both sides are accusing the other part of starting violent clashes along the border. A restart of the missing 350,000 barrels per day production is not just around the corner.