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Trends

Rotterdam (ARA) fuel oil - Trading USD1 higher

Singapore fuel oil - Trading USD1 higher

US Gulf fuel oil - Expected to open USD1 higher

OPEC’s internal tug-of-war

As the members of the oil cartel meet in Vienna today, the likelihood of a swift decision on the output ceiling has faded. Venezuela, the country with the biggest proven oil reserves, and Iran will be calling for a decrease in production towards the level agreed 6 months ago at 30 mbpd. OPEC (especially due to increased production in Saudi Arabia) has been pumping 31.5 mbpd due to uncertainty on the outcome of the Iran nuclear negotiations in Moscow on 18-19 June. It is worth noting that Saudi Arabia has eased a bit on the production, averaging 'just' 9.8 mbpd in May, down from 10.1 mbpd in April. We do not see a unanimous decision by OPEC as the most plausible outcome of the two-day meeting in Vienna. Instead we see a real risk of a split decision, and thus continued uncertainty until the Moscow negotiations on Iran’s nuclear program are through. OPEC, and Saudi Arabia in particular, seems determined not to see a repeat of the 2008 boom-and-bust cycle. Thus scaling back oil production on the down low is the most likely action to be taking to stabilise prices at current levels.

Later today (16.30 CET) the US inventory numbers are due. As refinery utilization have been kicked into gear to cope with the driving season, we are likely to see a draw on crude and build on products.

Recommendation

We strongly urge clients to pay close attention to the following dates in June. 13-14 June OPEC meeting in Vienna, on Sunday 17 June the second Greek election will take place. Monday 18 and Tuesday 19 June will give hints on Iran nuclear talks. On Thursday 28 June the US financial sanctions on any financial institution dealing with Iran will kick in. Saturday 30 June is the last day before EU sanctions on Iranian oil kick in.